Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

Oral Answers to Questions — INDUSTRY

Moderna (Witney) Ltd., Mytholmroyd

Mr. Madden: asked the Secretary of State for Industry what progress has been made in discussions between his Department and representatives of Sona Consultants Ltd. abut re-equipment of their Moderna plant in West Yorkshire; and if he will make a statement.

The Under-Secretary of State for Industry (Mr. Bob Cryer): Officials from my Department have been in frequent contact with Sona Consultants during the past two months. The company has explained the possibilities which are being explored for various combinations of products to continue to be manufactured at the Moderna plant. Re-equipment of the plant will depend to some extent on the product

range which is linked to current negotiations with potential custmers, including export customers, and I understand that Sona Consultants have written to my hon. Friend on 25th January with a further declaration that they intend to reorganise, re-equip and re-establish manufacturing.

Mr. Madden: What form of production is proposed by the new owners of the firm? Does the Minister agree with the workers at Moderna that there are reasonable grounds for optimism about the export potential of British-made blankets and that there is, therefore, no reason why the firm should be closed for a period of up to one year and why 332 jobs should be scrapped, particularly in an area with little alternative employment?

Mr. Cryer: It is difficult for us to make a judgment about the sort of production facilities that Sona Consultants intend to embark upon, since my Department has not received an application from them. As my hon. Friend knows, when the subject was raised in a recent Adjournment debate the Government made it clear that we were anxious to receive such an application, because we should then be able to make a better judgment.

Cable and Wireless Ltd.

Mr. Gow: asked the Secretary of State for Industry whether he will make a statement about the remuneration of the directors of Cable and Wireless Limited.

Mr. Ridley: asked the Secretary of State for Industry if he will make a statement about the salaries to be paid in future to the directors of Cable and Wireless Limited.

The Secretary of State for Industry (Mr. Eric G. Varley): I have nothing to add to the answers which my hon. Friend gave the hon. Member for Eastbourne (Mr. Gow) on 13th January.

Mr. Gow: Will the Secretary of State pay tribute to the directors of Cable and Wireless, which has had a post-tax profit increase of about 400 per cent. over the past six years? Is it not ludicrous that there should be more than 20 employees of Cable and Wireless whose salaries are in excess of those of the directors?

Mr. Varley: I join the hon. Member in paying tribute to a public company which has been so successful. As the hon. Member was told on 13th January, Cable and Wireless put certain proposals to me but they were unacceptable to the Government and I told the directors that.

Mr. Ridley: Has the Minister yet grasped the point that Cable and Wireless will not continue to be successful if its management is not properly rewarded? Does he not realise that what is necessary, instead of his absurd industrial strategy, is to pay managers properly for doing a good job?

Mr. Varley: I am in favour of paying everybody properly. As the hon. Gentleman knows—although he may not necessarily accept it—the Government have a prices and incomes policy, and if we had agreed to the proposals put by Cable and Wireless we would have violated that policy.

Mr. Norman Lamont: Is not Cable and Wireless having difficulty in filling the post of finance director? Instead of rushing to apply for the post, will the Ministear bear in mind that the company is considering having to appoint someone at sub-board level? Could not this experience be multiplied many times in the private sector? Since it is important that the best people should be tempted into the most important jobs, will the Minister persuade the Chancellor of the Exchequer, in the next stage of the incomes policy or in his next Budget, to give some overdue recognition to management?

Mr. Varley: I will draw the Chancellor's attention to that point. It is the Government's intention to look at all these matters in relation to our policy for the next phase of the incomes policy.

CBI

Mr. Rooker: asked the Secretary of State for Industry when he next plans to meet the leaders of the CBI.

Mr. Dykes: asked the Secretary of Sate for Industry when he next proposes to hold talks with representatives of the Confederation of British Industry.

Mr. Varley: I shall meet CBI representatives at the next NEDC meeting on 2nd February.

Mr. Rooker: When my right hon. Friend next meets CBI leaders, will he tell them that it is their obsessive hatred of the concept of planning agreements that has led to the situation that British Leyland is now considering sending abroad the work of making tools for its body-building programme over the next four years?

Mr. Varley: I congratulate my hon. Friend on his ingenuity in squeezing a question on British Leyland into a Question on the CBI. I have said on many occasions that the Government are disappointed with the progress of planning agreements, and to some extent my hon. Friend is right. The CBI should have given the policy more backing, and it has over-reacted to the system. As to British Leyland, I have seen reports in the newspapers that my hon. Friend plans to submit evidence to the National Enterprise Board. That is the right approach.

Mr. Dykes: In view of the recommendation of the majority report of the Bullock Committee, and in view of the sharp but understandable reactions of the CBI, would it not be better if the Government did not publish the draft Bill during the current session and gave more time for discussion? Is not the draft fifth directive of the EEC on worker participation to be republished in March? Should not more time be given and the draft Bill published in the following Session?

Mr. Varley: Ministerial responsibility for the Bullock proposals rests with my right hon. Friend the Secretary of State


for Trade. All that I wish to add is that the Government are committed to a radical extension of industrial democracy, and I have made plain on more than one occasion that we shall lay legislative proposals before the House in this Session.

Mr. Bryan Davies: When my right hon. Friend next meets the CBI, will he emphasise that the nation is scandalised by its reaction to the Bullock Report and that the nation regards the democratic participation of workers in the development of their firms and organisations as being just as right as the so-called share-holder democracy?

Mr. Varley: I agree with much of what my hon. Friend has said. We are committed to an extension of industrial democracy. Much of Britain's industrial problem arises from not getting enough out of our investment and our existing resources. Involving workers in decision-taking much more than in the past will help.

Mr. McCrindle: Will the right hon. Gentleman, together with the Secretary of State for Trade if necessary, meet the British Institute of Management and explain whether the hard-pressed managers in British industry can expect to gain if the majority report of the Bullock Committee is implemented?

Mr. Varley: Sir Derek Ezra is President of the British Institute of Management, and I know that he is committed to extending industrial democracy within the National Coal Board. I do not know whether his views are shared within the institute, but everything that I have said in relation to the CBI applies equally to the institute.

Mr. Biffen: Does the right hon. Gentleman agree that the Department of Industry will have an important part to play in the debate arising out of the Bullock Report and that, if constructive consultations on employee participation are to proceed, they must be on the widest possible basis? Would he agree that they should not be restricted merely to the concept of trade union representation on a unitary board?

Mr. Varley: When my right hon. Friend made his statement last week, he said that consultations would take place

immediately with all interested parties and that the majority report of the Committee would be the basis of the discussions. I do not think that I can add very much until those consultations have taken place.

British Steel Corporation

Mr. Tim Renton: asked the Secretary of State for Industry when he proposes to announce his decisions in regard to the British Steel Corporation's 10-year modernisation and capital re-equipment programme.

The Minister of State, Department of Industry (Mr. Gerald Kaufman): The Government remain committed to the principles of the 10-year development strategy. My right hon. Friend intends to announce decisions on outstanding specific proposals as soon as possible after receiving specific recommendations from the British Steel Corporation.

Mr. Renton: I appreciate the complexity of the matter, but does not the hon. Gentleman accept that, due to delays over some years, the cost of the modernisation programme has risen from £3,000 million when it was first published to perhaps £6,000 million now? Where is all that money coming from? Would it not be far better for the Government and the BSC quickly to agree on a modified programme and for the Corporation to be allowed to get on with it?

Mr. Kaufman: We should not have had that money at all if the House had accepted the Tory Party's attempt to delete the financial provisions from the Iron and Steel (Amendment) Act in the last Session. When the 10-year development programme was published in July 1973, no one—including the right hon. Member for Worcester (Mr. Walker), who sponsored it—envisaged that it could be implemented in one year. It was built in that inflation should be taken into account because inflation was soaring under the then Government. Steel investment this year is more than £600 million, which, as the responsible European Commissioner acknowledged to me, is the highest level in any EEC country.

Mr. David Watkins: One of the issues which still remains to be decided is the plate mill in the Consett works in my constituency. Is my hon. Friend aware that


we have been told for the past three years that we shall be given a decision as soon as possible? May we have something fairly specific fairly quickly?

Mr. Kaufman: My hon. Friend could have had an adverse decision fairly quickly, but we thought that the matter should be considered in order to give Consett and Hartlepool, together with Redcar, a chance of getting the plate mill. That is why the decision has not been made as quickly as some people may have wished. The BSC is re-examining the matter carefully and I can assure my hon. Friend that we shall give a decision as soon as we can after receiving the Corporation's proposals. Following my visit to Consett under my hon. Friend's sponsorship, I am well aware of its claims.

Sir A. Meyer: Is the hon. Gentleman aware that one of the consequences of the repeated deferment of a decision on Shotton is that the corresponding decision on whether the area should be given full development area status, which it needs so badly, has also been deferred? Will he take this into account in assessing the need for an early decision?

Mr. Kaufman: If the hon. Gentleman's vote on the steel development White Paper had been successful, Shotton would now be closing and there would be no uncertainty. The BSC has given evidence of the seriousness with which it is reexamining this issue by the fact that it is doing so in such depth, but a decision will be made as soon as possible. I received many letters from local authorities and others in the area paying tribute to my hon. Friend the Member for Flint, East (Mr. Jones) for the way in which he has advanced the case of his constituents.

Mr. David Watkins: asked the Secretary of State for Industry if he will issue a general direction to the British Steel Corporation to present him with proposals for the reorganisation of management on industrial common ownership principles.

The Under-Secretary of State for Industry (Mr. Les Huckfield): No, but the Government have decided in principle that employees should have the right to representation at board level.

Mr. Watkins: Is my hon. Friend aware that we are talking not about the Bullock

Report but about industrial common ownership? Is he further aware that management in the steel industry often appears to be almost as hierarchical as in the days of private lack of enterprise? Is it not time that something was done to make it more democratically accountable to all those involved in the industry?

Mr. Huckfield: I congratulate my hon. Friend on his Industrial Common Ownership Act and on his excellent speech on 19th January against the hon. Member for Eastbourne (Mr. Gow). I shall certainly bear in mind what he says. I am sure he will appreciate that the Government envisage the widest possible consultation on the Bullock Report.

Mr. Rost: If the Government are so keen to implement the Bullock Report for the undemocratic extension of trade union power and patronage, why do they not start the process in the public sector so that we can see whether the Government's proposals can really work before inflicting them on the rest of industry?

Mr. Huckfield: As the Government have already said, we accept the position in principle of the right to board membership on behalf of trade unionists. Obviously we wish to have the widest possible discussion of the issues involved. I am only sorry that the hon. Gentleman's contribution does not take us much further in that discussion.

Mr. Michael Marshall: Is the hon. Gentleman aware that the British Steel Corporation already has working directors at divisional level and that trade unionists are already on the main board of the Corporation? If the hon. Gentleman is to carry forward the argument of Bullock, as he is now doing, he must recognise that certain companies have already made arrangements that seem to have struck the right balance. Does not this illustrate perfectly that legislation is not required and that it is much better for different companies and industries to make decisions that suit their own needs?

Mr. Huckfield: I recognise the hon. Gentleman's line, but I am sure he will accept that the Government have said that they wish to proceed along the lines of the majority report. Obviously that does not rule out much of the flexibility that he has described.

Mr. Biffen: Does the hon. Gentleman think that the nationalised industries are suitable for the principles of common ownership?

Mr. Huckfield: That is a rather separate question which I hope the hon. Gentleman may table one day. As I have said to my hon. Friend the Member for Consett (Mr. Watkins), we shall bear in mind the aspirations of what he has said.

Mr. Rost: asked the Secretary of State for Industry what discussions he has had with the British Steel Corporation on the effects of cuts in public sector capital expenditure on the concrete and iron pipe sector of the Corporation.

Mr. Les Huckfield: Representations have been made to me by the chairman of the Corporation and by managers and the work force of BSC's Stanton and Staveley Group. Following discussions, the group management has indicated that the situation is more encouraging than was first intimated.

Mr. Rost: Has anyone told the Minister that British Steel has only this weekend announced short-time working at Stanton and Staveley on the concrete and the cast iron pipe plant as a direct result of the Government's announcement of capital expenditure cuts, which are hitting the building and construction industry harder than any other industry? Why have not the Government given a higher priority to maintaining capital expenditure and, instead of cutting that, cutting some of their public expenditure in other directions?

Mr. Huckfield: That supplementary question was a bit difficult to follow. However, it would seem that the hon. Member, who is always up and down at Question Time like a jack-in-the-box asking for public expenditure to be cut, is against public expenditure being cut when it affects his own constituency. He should realise that Labour Members appreciate that public expenditure can have effects such as those he describes. That is why several meetings have taken place recently to ameliorate the situation.

Mr. Ronald Atkins: Is there not a need for very considerable investment in the production of offshore pipes, which we have no capacity to manufacture at present?

Mr. Huckfield: I know of my hon. Friend's interest in this matter because he has tabled a Question on it previously. Over the weekend, the British Steel Corporation has announced its intention to go ahead and expand its capacity at Hartlepool for just this purpose.

Mr. Rost: On a point of order, Mr. Speaker. In view of the unsatisfactory nature of the Minister's reply, I beg to give notice that I shall seek the earliest opportunity of raising the matter on the Adjournment.

Northern Region

Mr. Radice: asked the Secretary of State for Industry whether he is satisfied with industrial progress in the Northern Region.

The Minister of State, Department of Industry (Mr. Alan Williams): We shall continue to promote industrial development in the Northern Region.

Mr. Radice: Does my right hon. Friend agree that the abolition of the regional employment premium, coming as it does at a time when industry in the Northern Region is extremely depressed and when there is also the threat from devolution, makes the case for a northern development agency even stronger than before?

Mr. Williams: I am sorry to disappoint my hon. Friend, but I do not necessarily accept his conclusion. He should bear in mind that the temporary employment subsidy gives a far more realistic form of assistance to firms that are really under pressure, and the switch to a more selective approach will be more advantageous to the Northern Region. I also draw my hon. Friend's attention to the consultative document in relation to devolution within England and ask him to consider how far it would be to the advantage of the North if the development agencies which he envisages were set up for every region. I am not sure that it would be to the advantage of the North.

Mr. Hal Miller: Is the right hon. Gentleman satisfied that no industrial investment in the Northern Region has been at the expense of the West Midlands? When he next meets the CBI, will he consider with it the Government's input, particularly the recommendations


of the sectoral working parties on industrial strategy?

Mr. Williams: The hon. Gentleman will know that few IDCs have been refused in the West Midlands. The difficulty of recent years is that, because of the international recession, there has been little mobile or new industry created here or in Western Europe. That is why there is understandable pressure in the West Midlands against regional policy. I ask the hon. Gentleman to look again, however, at the context in which my hon. Friend the Member for Chester-le-Street (Mr. Radice) asked his question and to consider the level of unemployment in the Northern Region. I am sure the hon. Gentleman will appreciate that it is essential to retain regional priorities.

Mr. Blenkinsop: Will my right hon. Friend look again at the question of replacing the general blanket aid of the regional employment premium by more specific industrial aids, since this is a matter of major concern in an area such as mine? Will he also consider the inadequacy of the temporary employment subsidy, particularly as a means of encouraging major investment in my area?

Mr. Williams: I am grateful to my hon. Friend for focusing attention on the fact that, in addition to the temporary employment subsidy, funds have been made available for a more selective approach to industrial development. I am sure he will appreciate that this will be extremely helpful in meeting the specific needs of firms that are considering setting up in the Northern Region.

Small Businesses

Mr. MacGregor: asked the Secretary of State for Industry what action he has taken over the past three months to help small businesses.

Mr. Anthony Grant: asked the Secretary of State for Industry what steps have been taken to assist small firms since the Minister responsible for them took office.

Mr. Cryer: In the course of the last three months the Government have announced changes in, and additions to, most of the sectoral schemes currently in operation under Section 8 of the Industry

Act 1972. They now contain special provisions for assistance to small firms towards the cost of consultancy studies, and in the case of the clothing industry scheme the minimum value of a project eligible for help has been reduced from £30,000 to £10,000. In addition, I have inaugurated a pilot counselling scheme for small firms in the South-West Region which, subject to our experience, we will extend in due course to the rest of the country.
The Small Firms Information Service has also been extended by the opening of a new sub-centre in Liverpool to serve small businesses in the area. The construction of 82 advance factory terrace or nursery units has also been progressing during the past three months. Work is progressing well on a study of the needs of small firms managers for training and how these needs can be met, and I am actively promoting the Department's scheme for collaborative ventures among small firms.

Mr. MacGregor: Is the hon. Gentleman aware that much more would be served if he looked at the fact that the flood of Government legislation, departmental bumf and bureaucratic intervention is killing off not only small businesses but the incentive to grow and to provide more jobs for many more people? If he is to protect small firms, will he consider setting up a strong interdepartmental committee to scrutinise all legislation and major regulations before they come to this House in order to exempt small businesses from those which are not appropriate to them?

Mr. Cryer: I am sorry that my answer took so long, but there has been a wealth of activity in the Department of Industry regarding small firms.
The hon. Gentleman will recall that value added tax was introduced by the Conservative Government. That was one of the sources of complaint. That is something that the Common Market has brought into a permanent situation. The Department is always reviewing the position of small firms and is constantly examining legislation to see in what way they can be helped. It is difficult to create two categories of people. with one of them working for small firms and the other working for large firms. Indeed,


I do not suppose that many hon. Members on either side of the House would choose, for example, to have lower standards of employment in small firms and perhaps worse safety standards than in medium and large firms.

Mr. Grant: Is the Minister aware that, in view of the greatly increased numbers of liquidations from bankruptcies, his efforts so far have been feeble in the extreme? Does he recall a resolution passed by the House exactly one year ago today calling upon the Government to alleviate the taxation and other burdens that were threatening the existence of small firms? When does he propose to comply with the wishes expressed by Parliament?

Mr. Cryer: Such changes have already been made. For example, corporation tax on profits up to £30,000 is levied at a lower rate. Quite recently, as the hon. Gentleman is no doubt aware, although his question does not exactly indicate the fact, the Chancellor of the Exchequer announced changes in capital transfer tax to allow for easier transfer of small businesses.
As to the question of bankruptcies, small firms are not separated in the statistics. I am, however, sure that the hon. Gentleman will be pleased to know that in 1976 bankruptcies at 7,172—that high figure is regrettable—were in fact down on 1975, when the figure was 7,271. I have no doubt that the hon. Gentleman will go round the countryside pointing out the marginally smaller number of bankruptcies which took place in 1976 and get away from the constant political diatribe that he and his supporters put up about the greater number of bankruptcies among small firms.

Mr. Madden: What advice is the Department giving to local authorities, such as the Merseyside County Council, which are anxious to enter into arrangements with the National Enterprise Board to assist small firms in safeguarding and promoting employment?

Mr. Cryer: My hon. Friend will know that we are looking at the whole question of the development of small firms in inner city areas. A committee is looking at that matter with a great deal of urgency. We are alive to the problem.

Mr. Adley: That is all right then.

Mr. Cryer: It is no use the hon. Gentleman shouting from a sedentary position. The fact of the matter is that the situation is being examined in great detail. Indeed, in Liverpool we are constructing 16 terrace units for small businesses among the 82 units which the Government are currently having constructed in using public expenditure. I do not suppose that the Opposition would jib at that.

Mr. Kenneth Clarke: Has the hon. Gentleman noticed that the Prime Minister's remarks at the Labour local government conference last week about the decline of small businesses and employment potential in inner cities were almost a repeat of the speech made by the Secretary of State for the Environment on the same subject in September last year and that they both expressed it better than he did in reply to the last question? When will all the window-dressing be translated into a statement on Government policy for reversing the trend leading to the decline of small businesses in inner city areas and removing the restraints on small businesses which have been described?

Mr. Cryer: The hon. Gentleman's comments demonstrate the strong sense of unity which prevails in the Labour Government. Those statements indicate that there are two elements in encouraging and preserving small firms. One element is central Government. I indicated earlier that the Department of Industry does not regard the whole matter as completely perfect. Nevertheless, we are encouraging small firms to the best of our ability in difficult economic circumstances.
The other element is local government. Both statements referred to by the hon. Gentleman indicated that local government had a part to play. We want to encourage local government, when making planning decisions, which often in the past have resulted in the disappearance of small firms, to bear this fact in mind. I am sure that local government will take notice of what my right hon. Friends said.

Investment

Mr. Viggers: asked the Secretary of State for Industry if he is satisfied with the current rate of industrial investment.

Mr. Varley: No, but it is now improving and is expected to pick up substantially over the next year or so.

Mr. Viggers: Does the right hon. Gentleman agree that overseas investment in this country is likely to be severely damaged by the proposals in the Bullock Report if it should be implemented? Does he regard the principle as being more important than the jobs which may be lost?

Mr. Varley: The hon. Gentleman is jumping to conclusions in suggesting that confidence is being harmed by proposals in the Bullock Report. Companies which are considering investing in the United Kingdom—in particular the overseas companies which I have contacted during the last 12 months—regard the prospects for investment as very encouraging.

Mr. Mike Thomas: Is my right hon. Friend aware of the damage that is being done to investment in the shipbuilding industry in Newcastle upon Tyne, and particularly on Tyneside, by the impasse which currently surrounds the Aircraft and Shipbuilding Industries Bill? Is he also aware of the investment which C. A. Parsons has made in the development of the steam generating heavy water reactor and the problems which are created for that company by the present difficulties in the power plant industry? Will he comment on both those industrial problems affecting the Northern Region?

Mr. Varley: There is a later Question on the Order Paper on the power plant industry. I think that I had better reserve my comments until I reach that Question.
My hon. Friend has made a strong point about the difficulties in the shipbuilding and aircraft industries due to the Bill being delayed. I very much hope that the examiners will report to the House of Lords very quickly and that the Bill will reach the statute book as soon as possible. There is no doubt that the delay is causing great harm and uncertainty in both those industries.

Mr. Wigley: Does the Secretary of State agree that one of the greatest factors in discouraging investment in industry is instability of policy and that, as a result, certain companies have not taken account of regional incentives in calculating whether to invest? Does he accept that the cut-off of regional employment

premium does incalculable harm to the encouragement of investment in areas such as Wales?

Mr. Varley: I do not agree that it does harm. In fact the REP, when it was in operation, represented only 2 per cent. in Wales. Many firms have told me and the Government that they were disregarding it as an incentive. As my right hon. Friend the Minister of State explained earlier today, in terms of preserving jobs the temporary employment subsidy is a more important incentive.

Mr. Norman Lamont: Is the right hon. Gentleman aware that my hon. Friend the Member for Gosport (Mr. Viggers) is quite right and that nothing could be more damaging to confidence in invest-ment than the unqualified introduction of the Bullock Committee's recommendations in the face of the unqualified opposition of management? As the Secretary of State for Energy tried to reassure management over the weekend by saying that the introduction of industrial democracy was not more alarming than the introduction of the vote, will the right hon. Gentleman point out to his right hon. Friend that the introduction of universal suffrage was not restricted to trade union members?

Mr. Varley: If the hon. Gentleman really wants to put questions to my right hon. Friend the Secretary of State for Energy, he should find a way of doing so and not put them through me. I do not know why he is getting excited and alarmed about industrial democracy. I always thought that an extension of industrial democracy and participation had some support within the Conservative Party. However, Conservative Members are getting themselves worked up into a lather over these matters. They should be examining the proposals carefully instead of jumping to these hasty conclusions.

British Aerospace

Mr. Tebbit: asked the Secretary of State for Industry what estimate he has made of the total cost to public funds of the British Aerospace Organising Committee during the financial year 1976–77.

Mr. Kaufman: £145,000.

Mr. Tebbit: I thank the Minister for telling us that figure, but does he think


that it is in the public interest that they should not know the details of how the money is being spent? In particular, what would be the damage to the security of the State that might arise if the public were to know how much of the money paid in emoluments to the members of the Committee is taxable and how much is non-taxable? Why will he not tell us that?

Mr. Kaufman: Even by his own standards the hon. Gentleman is being pretty bizarre. The fact is that the salaries of those who have been appointed salaried members of the Organising Committee are taxable. They have other expenses, of which we have given details in the House, which they have been using to try to compensate for the delay with the Bill caused by the hon. Gentleman and his noble Friends.

Mrs. Hayman: Is my hon. Friend aware that most of us are much more concerned with the actual problems with which the Organising Committee has to deal than with the details of its finances? Has he yet received the views of the members of the Organising Committee on the current proposals for full-scale funding of the HS146? When are we to have a decision, which is much needed in my constituency and elsewhere?

Mr. Kaufman: I can tell my hon. Friend that if there is one project above all others the prospects of which have been damaged by what the House of Lords has done to the Aircraft and Shipbuilding Industries Bill it is the HS146, the prospects of which have been placed in jeopardy by the delay. If Opposition Members doubt my words, perhaps they will accept the words of the air correspondent of the Daily Telegraph, Air Commodore E. M. Donaldson, who said:
Whether Britain's industry is nationalised or not, its top air firms, BAC and Hawker Siddeley, plus their missile divisions, will need to be merged and reorganised. Nationalisation seems to be the best way of accomplishing this. Some 200,000 jobs are at stake over the next 15 years and there are signs that other international air firms are not prepared to wait for Britain to sort itself out.

Mr. Grylls: I ask the Minister to try to be a little more truthful or accurate in his replies. He knows, does he not, that the Bill would have been passed by now if it had not been for the stubbornness

of the Secretary of State in not accepting the removal of the ship repairing clauses? That is the truth. As the Organising Committee of British Shipbuilders does not now exist because of all the resignations, what action does the Minister propose to take? Will he make a statement about the proposed State holding company for holding the existing State-owned companies? That could have been done a year ago and could have solved all the industry's problems without all this trouble.

Mr. Kaufman: My right hon. Friend the Member for Sunderland, North (Mr. Willey) has a Question on the Order Paper about the shipbuilding industry Organising Committee, and that will be dealt with in due order. As for the question of our being able to have an Act, of course we could have had an emasculated Act if we had wished, but we had introduced a Bill fulfilling our pledges at the previous two General Elections to the effect that we would nationalise ship repairing. The Bill must include ship repairing if it is to be enacted.

Companies (Disclosure of Information)

Mrs. Hart: asked the Secretary of State for Industry how many orders he has made under Section 28 of the Industry Act 1975.

Mr. Les Huckfield: None, Sir.

Mrs. Hart: May I ask why? Is it that the Secretary of State is totally satisfied with the information supplied through the National Economic Development Council, or is it that he is not so satisfied? If he is not so satisfied, what steps is he taking to ensure that the provisions about disclosure of information are implemented and that information is available to the trade unions?

Mr. Huckfield: Section 28 was always envisaged as a reserve power. I bear in mind what my right hon. Friend has said about the need to disclose information. I also bear in mind what she says about the need to give that information to the trade union movement. It is a section that has always been regarded, since the 1975 White Power, as a reserve power.

Mr. Adley: Does the hon. Gentleman understand that, while the exchange of information to trade unions about decisions taken at board level and about industrial participation is important, the real power nowadays in British industry tends to lie with trade unions? What is he doing to ensure that information about what goes on in trade unions and at trade union meetings is made available to management?

Mr. Huckfield: The hon. Gentleman can always join a trade union and find out.

Mr. Adley: I have tried twice and been turned down.

Mr. Huckfield: I do not know who they were, but they made an excellent decision.

Ferrous Foundries

Mr. Canavan: asked the Secretary of State for Industry whether he plans to increase the amount of financial aid available under the Ferrous Foundry Scheme; and whether he intends any amendments to the terms of the scheme.

Mr. Alan Williams: I shall be considering in due course whether to increase the financial allocation to the scheme. The scheme closed for applications on 31st December and I have no plans to amend its terms.

Mr. Canavan: Why is there so much secrecy about the amount of financial aid that is given out to individual companies when surely the general public and the workers within the industry are entitled to know how much public money is going to the employers? Will the Government also consider lowering the scheme's minimum investment from its present level of £25,000 in order to try to help employment prospects of workers in small foundries in places such as Denny and Dunipace, where most of the foundry workers are on short time?

Mr. Williams: I can reassure my hon. Friend that there is no question of secrecy concerning public funds. We are following the general practice in this as in all industry schemes of making the names available in the first quarter after the first payment is made. That is standard

procedure, so the information will be available.
As to the lower limit, I am grateful to my hon. Friend for his concern lest small firms should be excluded, but the £31 million which has already been allocated goes to 165 foundries, 94 of which employ fewer than 200 workers and 29 employ fewer than 50 workers. Therefore, I hope my hon. Friend will appreciate that in its present form the scheme is getting through to the small end of the industry as well as to the large end. There have been about 500 applications. I think that it has been one of the most successful of all schemes, and, as I say, the small firms have benefited as well.

Mrs. Bain: Is the right hon. Gentleman aware how appreciative most of the foundries are that have benefited under the scheme and that an early statement of the projections would be much appreciated by everyone? Does he also agree that one of the most important aspects in helping ferrous industries would be for the Government to reverse their policy on public expenditure cuts whereby orders coming through the construction industry and bodies such as the Post Office have affected the foundries in my constituency, for one area?

Mr. Williams: I am grateful to the hon. Lady for her initial comments. I am sure that in Scotland the scheme has been of considerable benefit. £5 million of the £31 million already allocated has gone to Scotland. The hon. Lady will appreciate that the ferrous foundry industry will benefit most from our getting the economy generally on to a sound footing. Indeed, it was indicative at the time of the last upturn that this was one of the industries that was earliest to show its shortage of capacity. We believe that the scheme will enable it to take full advantage of any upturn that takes place.

Power Plant Industry

Mr. Whitehead: asked the Secretary of State for Industry when he expects to conclude the consultations arising from the CPRS Report into the power generating industry.

Mr. Forman: asked the Secretary of State for Industry if he will make a statement on the reorganisation of the power plant manufacturing industry.

Mr. Varley: The consultations arising from the CPRS Report are being conducted with all possible speed.

Mr. Whitehead: Does my right hon. Friend agree that it is the essence of this problem that a steady forward ordering policy from the CEGB should be announced as soon as possible for the future if the whole industry is to survive? Will he also bear in mind particularly the question of some of the firms in the industry, such as Clark Chapman in my constituency, which have interests not only within but also outside the boiler-making industry? If my right hon. Friend is looking at further proposals by the CPRS, will he bear in mind firms such as that, because it is their buoyancy both inside and outside the industry that must be taken into account?

Mr. Varley: The consultations are going ahead as quickly as possible, as I have already indicated, and the point that my hon. Friend has raised will certainly be taken into consideration. I can confirm that one of the factors being taken into consideration is the possibility of a firm ordering programme.

Mr. Forman: Is the right hon. Gentleman aware that, while the House must sympathise with the problems of the power plant manufacturing industry, it is none the less not the answer to oblige the CEGB to indulge in a firm forward ordering programme for which there is no prospect of real demand for perhaps a decade? Does he not accept that a much better way would be to try to do more to promote the export prospects of the industry to ensure that it has a real chance in catching some overseas markets?

Mr. Varley: I think that it is within the interests of the CEGB and the two Scottish boards to have a power plant manufacturing industry in this country. There is no doubt that if the Government were not to take action at all the industry would go down; it would be knocked into the ground. It employs about 34,000 people directly. Therefore, one element is a firm ordering programme as far as the CEGB is concerned. However, I do not dissent from what the hon. Gentleman says about the possibility of winning export orders, and that will be considered also.

Mr. Albert Roberts: Will my right hon. Friend have consultations with the Secretary of State for Energy in view of the need for Drax B? As we shall need extra power in the 1980s, will he bear in mind that it will take at least eight years to construct?

Mr. Varley: I confirm that consultations are taking place, and discussions are taking place between my right hon. Friend the Secretary of State for Energy and the CEGB about Drax B.

Mr. Kenneth Clarke: Will the right hon. Gentleman spell out to his hon. Friend the Member for Normanton (Mr. Roberts) the cost in terms of increased prices to consumers of electricity if the CEGB is obliged to order coal-fired power stations in advance of any need when we already have a considerable excess of generating capacity in this country?

Mr. Varley: I cannot point that out to my hon. Friend because we do not know the full details and the full implications. Certainly the cost and the prices will have to be considered, but it is too early to go into them at this stage.

Instruments and Automation

Mr. Jay: asked the Secretary of State for Industry whether he proposes to proceed with the Government's proposed £25 million industry aid scheme for instruments and automation.

Mr. Alan Williams: Yes, as soon as it has received EEC approval.

Mr. Jay: Will my right hon. Friend assure the House that he will resist any proposals from the EEC to abandon aid to this important industry?

Mr. Williams: I can assure my right hon. Friend that we intend to press this proposal as hard as we can. He will be aware that this is the first occasion, I believe, when the Article 93(2) procedure has been applied to one of our proposals, whereas all the other member countries of the Common Market have had their aid proposals referred on numerous occasions for consultation.

Mr. Nelson: Is it not a fact that, while many of the other Government aids to industry have been allowed, this one has been blocked under Article 93 of the


Treaty of Rome? Will the Minister please indicate whether he is satisfied that some of the new and prospective reported proposals of the Government that will be put to the meeting of the NEDC on Wednesday for new specific sectoral assistance do not conflict with Article 93 as well, because many of us have serious doubts that this is a very unfair form of competition?

Mr. Williams: It is in the interests of member countries that competition is on a fair basis between member countries, but equally we have to ensure that we are protecting the interests of our own industries, particularly those in areas of rapidly evolving technology, such as this, and we try to strike a reasonable balance. I think that the fact that this is the first application which has been referred shows that we carry out adequate consultations and go into adequate detail in our studies before putting schemes forward.

LAW ENFORCEMENT

Mr. Tebbit: asked the Attorney-General if he is satisfied with the enforcement of the law in so far as it is within his responsibility.

Mr. Tim Renton: asked the Attorney-General whether he is satisfied with the enforcement of the law so far as it lies within his official responsibility.

Mr. Bidwell: asked the Attorney General if he remains satisfied with the workings of the legal system, in so far as it lies within his responsibilities.

The Attorney-General (Mr. S. C. Silkin): I have nothing to add to the reply which I gave to the Questions for Written Answer from the hon. Members for Cirencester and Tewkesbury (Mr. Ridley) and Christchurch and Lymington (Mr. Adley) on 24th January.

Mr. Tebbit: Is it true that it was the Attorney-General who advised the Government on the implications of the law in the Tameside case and got it wrong, that it was he who advised them on the law in the Laker case and got it wrong, and that it was he who advised them on the procedures in the hybridity affair on

the Aircraft and Shipbuilding Industries Bill and got it wrong? Does not the fact that Mr. Gouriet's recent action prevented a breach of the law in the Post Office affair suggest that he was wrong in that case as well? Why does the right hon. and learned Gentleman insist on giving this bad advice?

The Attorney-General: The first part of the hon. Gentleman's question embraced several different subjects, but, taking them as a whole, the answer is "No, I am not the only person who advises." I turn now to the last part of the hon. Gentleman's question. Having studied the judgments, which, as I said last Thursday, I had not at that stage been able to do, I can say that on the two major constitutional questions involved the court decided in my favour by two to one, with Lord Denning as the dissenting minority.

Mr. Atkinson: Reverting to the discussion on Thursday, does my right hon. and learned Friend remember that every newspaper in the country got the matter totally wrong by concentrating upon Lord Denning? Will he now confirm that, on the major issues facing him when he first considered the application, the two appeal judges came down firmly in his favour, therefore ruling out the necessity for him now to go to the House of Lords?

The Attorney-General: It certainly at least appeared that some representatives of the Press must have made their exit from the court when Lord Denning finished his judgment and they did not stay to hear the rest of the judgments, as a result of which Lord Denning was in a minority on the main questions. I am still considering with my advisers the question of an appeal to the House of Lords, because there were decided by the Court of Appeal matters of importance though outside the major constitutional matters upon which I attended before the court. I hope to give those the fullest possible consideration and then make up my mind.

Mr. Renton: Will the Attorney-General confirm that in the recent Post Office affair his decision was in no way influenced by the fact that the defendant was a powerful trade union?

The Attorney-General: Of course I confirm that. I gave my reasons in full


on Thursday. If the hon. Gentleman was not present, he can study Hansard. That certainly did not figure among my reasons.

Mr. Heffer: Will my right hon. and learned Friend explain why in 1971 the previous Government took absolutely no action, and will he take it that many of us are getting fed up with judges instead of the House of Commons trying to decide the law of the land?

The Attorney-General: I take it that by his reference to 1971 my hon. Friend is referring to the postal workers' strike for three weeks. Rightly or wrongly, at least one member of the Court of Appeal made a distinction between a complete strike and carrying on working but discriminating against some particular person. If that is a correct distinction, it is an encouragement to people to go on full strike rather than to discriminate. As regards the other part of my hon. Friend's question, it is not for me to comment upon the judgments of the judges and I refrain from doing so.

BRYANT BUILDERS (BIRMINGHAM)

Mr. Andrew F. Bennett: asked the Attorney-General how long the papers in the Bryant Builders (Birmingham) case have now been with the Director of Public Prosecutions; and when he expects the Director of Public Prosecutions to announce his decision as to what action he intends to take.

Mr. Rooker: asked the Attorney-General how long the papers in the Bryant Builders (Birmingham) case have now been with the Director of Public Prosecutions; and when he expects the Director of Public Prosecutions to announce his decision as to what action he intends to take.

The Attorney-General: So far as the first part of the Questions are concerned, I have nothing to add to the answers I gave to my hon. Friend the Member for Stockport, North (Mr. Bennett) on 22nd November, 13th December 1976 and 10th January this year. So far as the second part is concerned, a further police report of the further inquiries into this matter has been received and considered by counsel. The Director of Public Prosecutions is now considering counsel's advice.

Mr. Bennett: Does my right hon. and learned Friend agree that the time during which this matter has been under investigation by the police and consideration by the Director of Public Prosecutions is appallingly long, which suggests to some people that there is a cover-up going on and to others that the whole system of the police investigating and then the Director giving consideration needs major overhaul?

The Attorney-General: I agree that it is a long time since this matter was first before the police and before the Director. Unfortunately, very complex inquiries have had to be made. Counsel has advised from time to time on the state of the inquiries to date and asked for further inquiries to be made. Long as this process has been—I agree entirely that is unfortunate that it should take so long—I assure my hon. Friend that I have myself had control over the last part of the matter and that it is being dealt with as rapidly as possible.

Mr. Rooker: Is my right hon. and learned Friend aware that among those who think that a cover-up is going on are the West Midlands police themselves? If such people think that a cover-up is going on, is it not cause for great concern? My right hon. and learned Friend has assured the House, of course, that there is no cover-up, but will he make sure that the matter is brought to a speedy conclusion, as the office of the Director is now chock-a-block with reports from the West Midlands police?

The Attorney-General: In case I did not make it clear before, I do so now. There is absolutely no question of any cover-up going on. It is a question of the evidence, and counsel are advising on the evidence. Counsel are fully aware of all the facts, as is the Director of Public Prosecutions. There is no scope for a cover-up, even if one were wanted, which it is not.

DIRECTOR OF PUBLIC PROSECUTIONS

Mr. Canavan: asked the Attorney-General when he next expects to meet the Director of Public Prosecutions.

Mr. Skinner: asked the Attorney-General what recent communication he has had with the Director of Public Prosecutions.

Mr. Christopher Price: asked the Attorney-General when he next intends to meet the Director of Public Prosecutions.

Mr. Gow: asked the Attorney-General when he next proposes to meet the Director of Public Prosecutions.

The Attorney-General: I meet the Director of Public Prosecutions and receive communications from him as often as the need arises.

Mr. Canavan: Will my right hon. and learned Friend remind the House that the powers of the Director of Public Prosecutions do not extend to Scotland, and will he confirm that the recent injunction granted by the Court of Appeal does not extend to Post Office workers in Scotland? Is my right hon. and learned Friend aware that many of us in the Labour movement who wholeheartedly supported him in his efforts to defend the rights of this House against the court would also defend the rights of Scottish Post Office workers to demonstrate against the apartheid régime in South Africa?

The Attorney-General: Fortunately, I am not responsible for Scots law. That is for my right hon. and learned Friend the Lord Advocate. As to the second part of my hon. Friend's question, I hope that I am fulfilling my duty to defend both the proper rôle of Parliament and the proper rôle of the courts.

Mr. Gow: Did the Attorney-General consult the Director of Public Prosecutions about his decision in the case of the Post Office union, and has he yet decided whether he will exercise the right that has been given to him to appeal to another place?

The Attorney-General: My answer to the first part of the question is "No", because we were not concerned with a criminal prosecution. As the hon. Gentleman knows, the case involved a civil remedy for an injunction. I consulted all the advisers that I normally consult in relation to such issues. I have already answered the second part of the question. I am still considering it.

Mr. Price: Is the Attorney-General aware that there is grave dissatisfaction both with the length of time that the DPP's office takes to consider some of these cases and with the adequacy with which the office seems to have considered them? When he next meets Sir Norman Skelhorn or his successor, will he discuss with him Government plans for a full, independent prosecution process in England which is independent of the police? Will he also say something about how such preparations are going?

The Attorney-General: It would be going too far to say that the Government have such plans, but of course there have been a number of suggestions, including those by the organisation Justice, about the prosecution processes in general. That is a matter with which my right hon. Friend the Home Secretary is closely concerned, and he and I, when necessary, discuss the matter, as we do with the DPP. I can assure my hon. Friend that there is no complacency. But there are staff and other difficulties which we are trying to overcome as best we can, pending, perhaps, a final decision about what the prosecution process should be.

QUESTIONS TO MINISTERS

Mr. Fletcher-Cooke: On a point of order, Mr. Speaker. In the course of the proceedings that have been mentioned today, the Attorney-General said that he was responsible to the House of Commons, and the House of Commons alone, for giving his reasons for prosecutions and related matters in the courts. We have an opportunity of 10 minutes every month to cross-examine the right hon. and learned Gentleman on these reasons which, he says, he is willing to give to the House of Commons. Indeed, he has said that he is anxious to give them. Through no fault of his, a number of Questions have remained unanswered today. Could you, Mr. Speaker, bring to the notice of the authorities concerned that in future, thanks to the Attorney-General's admission to the Court of Appeal, we shall require longer to cross-examine him about his motives?

Mr. Speaker: That is a matter for someone other than myself. I am sure that others will have heard the hon. and learned Member's point of order.

Mr. Ridley: On a point of order, Mr. Speaker. We now have a different situation. In view of what has happened with the present Attorney-General and the way in which he has performed his duties, could arrangements be changed so that, instead of starting some other departmental Minister's Questions at 2.30 p.m. and ending up with 10 minutes for the Attorney-General at 3.20 p.m., we did it the other way round? It is time that we had a proper opportunity to check the Attorney-General's accountability which he is putting forward as his reason for not going before the courts.

Mr. Speaker: I am sure that those suggestions will be considered by the usual channels.

UNION OF POST OFFICE WORKERS (RELATOR PROCEEDINGS)

Mr. Speaker: On Thursday last, the Attorney-General made a statement on his reasons for refusing his consent to the application by Mr. Gouriet to bring relator proceedings for an injunction against the Union of Post Office Workers. Subsequently, the hon. Member for Tottenham (Mr. Atkinson) asked me to give a ruling on a number of issues. He asked me to rule whether the Attorney-General, if he were to decide to appeal to the House of Lords against the decision of the Appeal Court on Mr. Gouriet's application, would be doing so on behalf of the House of Commons.
The situation is that the Attorney-General is an independent Law Officer of the Crown. My understanding of the position is that if he decides to appeal to the Lords his action would be taken in that capacity. Therefore, this House is not involved in his decision.
The hon. Member also raised with me the competence of the House of Lords to consider this case. That is clearly not a matter for me.
Finally, the hon. Member asked whether this House could debate the status of the Attorney-General in this matter and express a view upon it. This House is free to discuss what it likes, but it is for the House itself and not for me to decide subjects for debate.

Mr. Atkinson: Thank you for that statement, Mr. Speaker. I give you notice

that I want to raise the matter under Standing Order No. 9 after the EEC statement.

Mr. English: On a point of order, Mr. Speaker. You said that the Attorney-General alone may decide whether to appeal to the House of Lords. I am not sure whether he has any ground to appeal since two of the court ruled in his favour. But is it not the case that a lawyer normally takes the advice of his clients? [An HON. MEMBER: "A lawyer gives advice."] The hon. Member is correct to say that a lawyer gives advice to his client. In this case the client is the Cabinet of the United Kingdom, which is responsible to this House.

Mr. Speaker: I am not responsible for the Cabinet.

The Attorney-General (Mr. S. C. Silkin): Further to that point of order, Mr. Speaker. I must make it clear that I am not responsible to the Cabinet on this matter but only to myself. I am in that position—which all lawyers regard as being an unfortunate one—of being my own adviser.

Mr. George Cunningham: On a point of order, Mr. Speaker. I want to raise a matter relating to the Speaker's Conference. Should I raise it now or at the end of the EEC statement?

Mr. Speaker: I presume that we have finished with that matter now.

Mr. Ridley: Further to that point of order, Mr. Speaker. The Attorney-General has just said that he is responsible only to himself. He said before the court that he was responsible to this House for his decisions. Now he appears to have changed his mind. In view of this confusion, there should be a debate in the House and an opportunity for these matters to be discussed.

Mr. Speaker: Order. I hope that we shall not pursue this matter. I have given the House a clear statement. Unless anyone feels that he will be burned up if he does not ask a question, I suggest that we move on.

Mr. Christopher Price: Further to that point of order, Mr. Speaker. It is important that we should get this issue clear. I accept your statement that if the Attorney-General were to decide to


appeal he should do it on his own behalf. But "Erskine May" makes clear that this sort of matter between the High Court of Parliament and the High Court of Justice has been an issue from time to time over the past few hundred years. It is important for us to know the grounds on which the Attorney-General is appealing. Is it not important that we as a Parliament are able to debate this issue as early as possible? Can you at least take that point into consideration?

Mr. Speaker: I have made clear that, of course, the House can debate what it likes, but it is not for me to say when it debates an issue.

SCOTLAND AND WALES BILL (SPEAKER'S CONFERENCE)

Mr. George Cunningham: My point of order, Mr. Speaker, relates to Speaker's Conferences, so-called. You will have seen reports in the Press over the weekend that there is a possibility that you may be invited by certain Members to set up a new Speaker's Conference with a view to considering, amongst other things, the question of the representation in this House of Scotland and Wales following a possible passage of the devolution Bill. You may be aware that there are amendments on the Notice Paper for the Committee of the whole House this week relating to this matter. If those amendments were passed—and I understand that you have no locus in relation to what might be in order in the Committee—any discretion in your hands whether you should agree to set up a Speaker's Conference on this matter would have passed from you and you would be bound by the statute passed by Parliament.
I think, Mr. Speaker, that there are some matters on which every hon. Member would wish to have some indication from you before deciding upon those amendments, should they be selected, and, even more so, if those amendments were not to be selected, so that the discretion would lie completely unfettered in your hands. Can you confirm that a Speaker's Conference is a private Committee of your own, not a Committee of this House, which would therefore be established not by vote of this House and the Members chosen not

by vote of this House and the list not amendable by this House but only as a result of what I would with great respect call a cabal between the self-appointed prefects of the House and yourself?
May I put it to you, Mr. Speaker, that if you were to become involved in a matter of this degree of political controversiality the position of the Chair would surely be considerably weakened? May I also ask whether you have had any approach so far as to your willingness to call a Speaker's Conference, whether following statute or without the necessity of statute?
Finally, may I ask you, Mr. Speaker, what guidance you can give the House as to the basis on which you would choose Members to serve on a Speaker's Conference, given that the division of opinion in the House would not, on the issue of the representation of Scotland and Wales, follow party lines?
I think that many hon. Members would appreciate your guidance on those points, Mr. Speaker, not necessarily today but before the Committee of the House considers the matter tomorrow.

Mr. Pym: Further to that point of order, Mr. Speaker. There may be amendments to the Scotland and Wales Bill that could give rise to the fears just expressed by the hon. Member for Islington, South and Finsbury (Mr. Cunningham). I have not seen them, but they may be on the Notice Paper. But I rise, for the purpose of greater clarity concerning amendments put down by myself and my right hon. and hon. Friends, to say that nothing we have proposed by way of amendment requests you, let alone instructs or requires you, to set up a Speaker's Conference. We have made clear in our amendments that the initiative lies with the Prime Minister, not with you, but request that you should perhaps consider presiding over such a conference, I think it wise to make that clear, because I think that I should have some sympathy with the hon. Gentleman's point of view, in that we should not wish to have you put in any awkward political position. Normally Speaker's Conferences are convened on the initiative of the Prime Minister, and we have adhered to that in our amendment.

Mr. Heffer: Drop the Bill.

Mr. Speaker: Happily, I am not required to rule on that.
The hon. Member for Islington, South and Finsbury (Mr. Cunningham) has raised a number of issues that are hypothetical but of great concern to the House. I shall study the hon. Gentleman's point of order, to which I listened carefully. If there is any advantage in my making a statement to the House, I shall do so. Otherwise, if the House does not mind, I shall communicate with the hon. Gentleman. If I think that there is advantage to the House in my saying anything, I shall naturally be very willing to do so.

EUROPEAN COMMUNITY (MEET INGS OF COUNCIL OF MINIS TERS)

The Minister of State, Foreign and Commonwealth Office (Dr. David Owen): With your permission, Mr. Speaker, I will make a statement about business to be taken in the Council of Ministers of the European Community during February. The monthly forecast for February was deposited on 28th January.
At present four meetings of the Council of Ministers are proposed for February. Foreign Ministers will meet on 8th February; Finance Ministers on 14th February; Agriculture Ministers on 14th, 15th and 28th February and 1st March.
Ministers at the Foreign Affairs Council will consider problems in the fisheries sector, preparation for further work in the Conference of International Economic Co-operation, and the Euro-Arab dialogue. They will discuss the Community's relations with Portugal, Japan, Spain and Cyprus and a financial protocol with Turkey. Financial and economic co-operation protocols with Israel will be signed.
The agenda for the Finance Ministers' Council has not yet been settled, but among the subjects Ministers could discuss are the fourth medium-term economic policy programme and export credit policy.
At the Agriculture Council on 14th and 15th February, Ministers are expected to have their first discussion of the Com-

mission's proposals for agricultural prices for 1977–78, and they will also consider proposals on potatoes and for increasing financial limits under the farm structure directives. In addition they may discuss proposals on hops, and, depending upon the outcome of the Foreign Affairs Council on 8th February, they are likely to consider fisheries conservation measures. They will resume their consideration of the price proposals at the Agriculture Council on 28th February and 1st March.

Mr. Hurd: The right hon. Gentleman has told us that two sets of Ministers, the Foreign Ministers and the Agriculture Ministers, will be discussing fishery matters in the course of the next month. Can he tell us how the line is drawn between them? Who discusses what? This is a rather important question in view of what the Minister of Agriculture, Fisheries and Food told the House on 20th January about divergences between the two Departments. Can the right hon. Gentleman give us an assurance that, whatever may have been the case in the past, there is now one policy which is clear, united and robust in defence of this British interest?
There was no reference in the right hon. Gentleman's statement to the preparations for the Belgrade Conference to review the outcome of Helsinki. That may be because it comes under political co-operation. Can the Minister give us an assurance that the Foreign Ministers are setting about preparing for the conference with a view to the Community's once again speaking with a clear and united voice at the conference?
I do not want to embarrass the right hon. Gentleman, but when does he expect the Council of Ministers to review the progress made in each member State in preparing for direct elections in 1978 and fixing a firm date for them?

Dr. Owen: With regard to the hon. Gentleman's first point, let me make it clear that there is no divergence, nor has there been any. In my view, there need be none, because the long-term and short-term interests of the fishing industry are closely intermingled.
I have answered a Question by the right hon. Member for Down, South (Mr. Powell) on ministerial responsibility. It is a difficult matter. Broadly, external relations with third countries are dealt


with by Foreign Ministers and the internal regime is dealt with by Fisheries Ministers. The problem has been that some member countries' Fisheries Ministers are not the same as their Agriculture Ministers. Some member States have wished to have fisheries discussions inside the Foreign Affairs Council. It is the belief of my right hon. Friend the Foreign and Commonwealth Secretary and myself that the detail of the internal fisheries policy would much better be discussed by those Ministers with a day-to-day relationship with the industry. We proposed that that should happen last month, but that discussion was cancelled because of a decision of my right hon. Friend the Minister of Agriculture, Fisheries and Food, after representations from, I think, a few other member States and the Commission, that it was best postponed. I very much hope that conservation and details of the interim regime will be discussed in the Agriculture Council.
Follow-up work for the Belgrade Conference is taking place in two main forums. It was discussed in the Council of Europe in Strasbourg at a meeting I attended at the end of last week. I have just come from the first meeting on political co-operation, held in London, which started today. The matter is on the agenda for political co-operation, and it is largely dealt with there rather than in the Council of Foreign Ministers.
As for when the Council of Foreign Ministers will discuss direct elections, I do not think that it is likely to fix a final date in 1978 for direct elections until member States have started to make provision within their own legislative assemblies for direct elections. The hon. Gentleman will, perhaps, be aware that no member State has yet taken any legislative action to implement direct elections in 1978.

Mr. Thorpe: Since we are discussing relations with Turkey and Cyprus, in view of our ongoing discussions with Greece, and while welcoming the talks between Archbishop Makarios and Mr. Denktash, may I ask whether the right hon. Gentleman would agree that there is scope for a major Community initiative in trying to get some form of settlement for Cyprus? Would he further agree that the Foreign Affairs Council has a high

responsibility for reaching an agreement on this matter?

Dr. Owen: This topic will be discussed either today or tomorrow by Foreign Ministers discussing political co-operation in London. I very much agree with the right hon. Gentleman that this is of major concern for the Community because of trade relations, because of our wider political need for stability in the Mediterranean and because of the good relations which we wish to maintain between Greek and Turkish Cypriots. There is a rôle for the European Community, but I would not exaggerate that rôle. It is one that is now best played in concert with the new Administration in the United States, which has already made it clear that it wishes to examine the problem in considerable detail.
There have been frequent discussions among members of the European Community on this issue. There is a wide degree of agreement. The right hon. Gentleman has drawn attention to the important meeting between Archbishop Makarios and Mr. Denktash. This is a welcome development. In the last analysis, whatever initiatives are taken from outside, a permanent settlement which will heal the problems of Cyprus and bring the two communities together will be determined only by the two communities.

Mr. Spearing: I thank my right hon. Friend for making arrangements for the publication of EEC document titles in the London Gazette. Can he give details of this arrangement to the House? Can he further explain why agricultural prices in the Community need to be discussed when there is a current levy of 65p per lb on butter and 54p per lb on cheese? Is my right hon. Friend aware that, for butter, this is well over double the world price? Why, then, is there a need to discuss prices?

Dr. Owen: I am glad that I have been able to meet my hon. Friend's suggestions about the EEC documents. The best way of making the details available to the House might be for him to table a Question, when I will gladly make the information available. This is an attempt to produce a more open discussion. As my hon. Friend knows, I am in favour of such open discussion for the European Community.
The Government's attitude towards price increases on products in surplus is well known. They believe that the case has to be made out—and we do not think it has been made out so far—for any substantial price increases on surplus commodities. We recognise that this policy may take some time to develop, but it is a basic point in our approach to the whole agricultural policy. We believe that price increases should not take place—certainly not substantial price increases—in respect of surplus commodities.

Sir G. Sinclair: Will the right hon. Gentleman accept that it is a great encouragement to many people on both sides of the House that the two communities in Cyprus are once again conducting a dialogue? Will he also accept that this problem can in no way be settled entirely locally? I do not want to draw any analogies from further afield, but this is a matter of great international concern. Does the right hon. Gentleman agree that it is important that Britain, having exercised authority for so many years over Cyprus, should make quite sure that she is briefed on both sides of the argument about what has happened during the past 12 years in both communities? We should use that knowledge not to look back and engage in recrimination but to avoid future suffering being imposed on one community by the other.

Dr. Owen: I agree with the hon. Gentleman. It was for that reason that before Christmas I visited Cyprus. I was the first Foreign and Commonwealth Minister to visit Cyprus since the tragic events of 1974. I talked to all shades of opinion on all sides. Further, there is a fairly continuous dialogue between the Foreign Ministers of some of the other major countries most closely concerned and there is discussion inside the European Community's political framework. There may come a time, and that time may soon be upon us, when an initiative from outside will help the two communities to reach a solution. I still believe that we should not play down the necessity for this issue to be settled between Greek and Turkish Cypriots.

Mr. John Ellis: Will my right hon. Friend make quite clear in the talks to be held concerning direct elections that the date 1978 is a pipe dream? Will he be the first representative to say that this is

so? Since we have not discussed in the House issues such as the size of the electorate, how Members will be elected, and whether they will sit in the House of Lords, is it not completely unrealistic to adhere to this date? Will my right hon. Friend be the first Minister to say that this is so? Is he aware that some of us feel that if the date for direct elections never came that would be too soon?

Dr. Owen: It is necessary for the House to discuss this matter. There is before the House a report from the Select Committee dealing with some of the points of detail which my hon. Friend has raised. There is no doubt that the House will want to take a view on the suggested distribution of seats, the form of election and a whole variety of issues. On the question of principle, on which my hon. Friend clearly has different views from those held by myself and the Government, I must make it clear that we are committed to use our best endeavours to introduce direct elections by May or June 1978.

Mr. Scott-Hopkins: Reverting to the question of fishing, can the right hon. Gentleman confirm that he is doing everything he can to see that it is the Agriculture Ministers who take a final decision on the internal regime within the 200-mile limit? Further, can he give any indication to the House as to how the negotiations are going with Iceland and whether there will be any chance of the results of Mr. Gundelach's negotiations being discussed in the Council of Ministers before the end of February? Can the right hon. Gentleman say what action is being taken concerning the many Russian, East German and Polish vessels—among those of other countries—which have been over-fishing within the 200-mile European zone?

Dr. Owen: I am glad to confirm that a message has been sent to the countries the hon. Member has mentioned, and will eventually be sent to all third countries, enforcing the imposition of a quota system for January, February and March by means of a licensing system. This is a considerable step which the British Government have been able to achieve. We have always argued that we need to reinforce quotas with a licensing system. We hope soon to convince the Com-


munity of the necessity for a regime of coastal belts.
As for the hon. Member's question about the Agriculture Ministers, I hope that this issue will be discussed.
Turning to Iceland, there will be a report from the Commission to the 8th February Council dealing with the progress that has been achieved. We have made it clear to the Community on, for instance, the quota it has put forward on cod that we could not possibly agree to that without any knowledge of what is happening in Iceland. This is one of the reasons why many of us are beginning to feel that the chances of reaching an interim fishing agreement are growing slimmer every day. We may well not be able to have an interim agreement.

Mrs. Millie Miller: Bearing in mind the remarks of my right hon. Friend concerning the discussions at Belgrade, may I ask him to remember that there are certain aspects of the Helsinki Agreement on which the Government might be a good deal more forceful, in particular the request from a group of professors from this country to be allowed to visit the Soviet Union to attend a symposium there? Is my right hon. Friend also aware that there should be no playing down of our views on the Helsinki Agreement because the Belgrade meetings are coming along?

Dr. Owen: I can assure my hon. Friend that there will be no playing down of these issues. Human rights are of great concern to everyone in this House. We ought to be prepared to put our point of view firmly and resolutely. On the other hand we must recognise that progress will not be as rapid as many of us would wish. This is a dialogue which will have to take place over some years, and we shall find that it is best conducted without recrimination. Unless that is so, we shall not make progress. We have to be firm and clear and to be prepared to champion individual cases as well as the general case. We must act in that spirit and try to make progress. That is the fundamental point.

Mr. Peter Mills: When the Ministers of Agriculture meet on 14th and 15th February, will they discuss the whole business of co-responsibility for milk products? Many of us realise that this

is the only way forward in that sector. Secondly, will they discuss a reduction in the intervention price of skimmed milk powder, since otherwise farmers will go on producing it purely for intervention?

Dr. Owen: The Commission's proposals on the price review have not yet been received, but we expect them shortly. As soon as they are received, the United Kingdom delegates will have to decide their policy. Although we already have a clear idea of them, I prefer to await the Commission's proposals, which will be directed to both the issues raised by the hon. Gentleman.

Mrs. Bain: May we have an assurance that the British Ministers representing the Ministry of Agriculture or the Foreign Office in the fishery talks will be adequately briefed on the needs of the Scottish inshore fishing industry? May we have the right hon. Gentleman's personal assurance that everything possible will be done to reach agreement on conservation measures in view of what has already happened to the herring industry?

Dr. Owen: I recognise the interest of the Secretary of State for Scotland. I have never agreed to any issue in Brussels on fisheries questions without consulting not only my right hon. Friend the Minister of Agriculture, Fisheries and Food but my right hon. Friend the Secretary of State for Scotland, and on occasion the Scottish Office has been represented at the meetings, particularly where Scottish interests were bound to arise.

Mr. Heffer: The Government are constantly reminding me and others of my hon. Friends of Labour Party Conference decisions on the devolution Bill and other issues. May I remind my right hon. Friend of the decision of the Labour Party Conference on the question of direct elections? The Labour Party has made it clear that it is opposed to direct elections. Will my right hon. Friend therefore say that, while he and the Government may be in favour of direct elections, the Labour Party is not, and that next year's elections are an absolute nonstarter?

Dr. Owen: I agree that there is no doubt that that was the decision of the Labour Party Conference. I have always been among those who believe that one


should take conference decisions seriously. They are not binding on a Labour Government, but they are not to be lightly turned aside. Many of us would hope to be able to convince other members of the party and those who vote at the conference of the validity of fighting an election along with other democratic Socialists in Europe.

Mr. Blaker: I agree a good deal with what the right hon. Gentleman said on the subject of human rights in answer to the hon. Member for Ilford, North (Mrs. Miller), but does not the right hon. Gentleman agree that the Foreign Ministers ought to be taking a common position on this matter now, bearing in mind that violations of human rights in the Soviet Union and other Eastern European countries have become more frequent and serious recently? Is there any good reason for waiting for the Belgrade Conference, which is months away? Why not speak out now as a Community?

Dr. Owen: We do discuss this matter on an on-going basis, and I should not be surprised if some of the recent events figured in the discussions on political co-operation. But we need a wider forum of debate in the country as a whole if we are to change the atmosphere. I do not know whether there have been more violations, but one of the advantages of the Helsinki Agreement is that it has provided a silent force inside many countries where human rights have not existed to the fullest extent. It has focused debate and has, if one likes, given legitimacy to those who wish to argue for improved human rights. It is noticeable that those Western democracies in Europe with the closest relationship with Eastern European countries believe that the agreement has had some success in this regard.

Mr. Body: Is it not likely that when the Ministers of Agriculture meet we shall be told again that our pig subsidy system is illegal? Are the Government satisfied that it is illegal? If it is, will the right hon. Gentleman give an assurance that the Government will nevertheless pursue this course of illegality and not abandon the interests of our own pig producers?

Dr. Owen: Following consideration of the Government's decision to implement a temporary pig subsidy, the Commission

has opened formal proceedings under Article 93 of the Rome Treaty. The Government are considering their response, and I have nothing to add at this stage.

Mr. Marten: As Britain is the current Chairman of the Council of Ministers, will the Government use their influence to have some of these Council meetings, if not in whole certainly in part, held in public? Secondly, when Ministers are talking about co-operation, will the Government raise the question of lack of co-operation over the case of Abu Daoud?

Dr. Owen: My right hon. Friend the Secretary of State has made it clear that, when one looks at any convention or agreement on terrorism, it is a question not just of words but of the spirit and philosophy underlying it. Clearly, there are lessons for us all to draw on the full implementation of that convention.
The question of meetings of the Council of Ministers being held in public is difficult. As I have told the House before, and as my right hon. Friend has told the European Parliament, there are some senses in which the Council of Foreign Ministers is a Cabinet and some senses in which it is a legislature. That aspect of its work which is Cabinet would be hard to open to the public. All that would happen, as happens in many cases in the United Nations, is that discussion would go on in corridors and elsewhere and not on the floor. But there are some arguments for having the legislative function more public.
My right hon. Friend the Secretary of State for Energy has opened this subject up with some of his colleagues in the Council of Energy Ministers, and we are studying the responses. If there were such agreement, I dare say that it would help the working of the Council in this respect and also increase public knowledge of that working. We are prepared to consider it very seriously and are studying it. But there are great difficulties.

Several Hon. Members: rose—

Mr. Speaker: I propose to call the four hon. Members who have been rising to ask questions throughout. I hope that they will be brief.

Sir B. Rhys Williams: At the meeting of Finance Ministers on 14th February, will the British representatives be in a position to make specific representations about implementation of the Duisenberg Report, particularly on ways in which Britain could collaborate in setting up a multi-currency system for Europe on civilised lines?

Dr. Owen: It is too early to firm up our response to those proposals, but we are interested in them. We think that they need further and more detailed study.

Mr. Rees-Davies: May I revert to the question of the violation of human rights? Will the Government ensure that the Foreign Ministers at their meeting on 15th February consider the report on breaches and violations of human rights in Cyprus? Secondly, is the right hon. Gentleman aware that the report of the Dalibard Committee, dealing extensively, in over 100 pages, with pillaging and other acts in churches and other historic monuments in Cyprus, has not been published at all? Will the Government ensure that this report is also available to the Council of Foreign Ministers when it considers the overall picture? Finally, what is being done about the continuing removal of people from their homes in Cyprus, right up to the present time?

Dr. Owen: Whatever study of these reports takes place, it is essential not to lose sight of the necessity for preventing such situations from occurring at this moment in time, and we should do all we can to prevent them, or at least to find out whether the allegations that are made have any foundation in fact.
I am not sure of the procedure as far as the Dalibard Report is concerned. I will look into it. There are well-known

procedures in the Council of Ministers, and they will be gone through.

Mr. Rost: May we expect some progress on the disputed siting of the joint European Nuclear Fusion Research Project? Does the Minister not accept that the delay in reaching agreement could be prejudicial to long-term energy resources?

Dr. Owen: The delay is regrettable but what is important is a firm decision. I have made it quite clear that I do not think that we shall make progress simply by putting the issue on the agenda. A great deal of work is going on as well as a lot of discussion. I am hopeful that when the matter does go on the agenda it will enable a firm decision to be made.

Mr. Channon: Does the Minister realise that there is now widespread scepticism in Europe whether the Government are intending to meet the date at present proposed for direct elections? Does the Minister recognise that unless the Government come forward with a Bill in the near future that scepticism will be justified? Will the Minister please impress this upon his right hon. Friend?

Dr. Owen: I am well aware that probably meeting the deadline presents more problems for this country than for other countries. It would be foolish to ignore that. A major piece of constitutional legislation is at present on the Floor of the House, and that is bound to have an impact on our ability to carry another important piece of constitutional legislation this Session. But we have made it clear that we shall use our best endeavours to bring forward that legislation at the earliest possible time, and we intend to meet the 1978 deadline.

UNION OF POST OFFICE WORKERS (RELATOR PROCEEDINGS)

Mr. Atkinson: I beg to ask leave to move the Adjournment of the House, under Standing Order No. 9, for the purpose of discussing a specific and important matter that should have urgent consideration, namely,
the Appeal Court judgment, to define the area of absolute discretion embodied in the Attorney-General and his relationship to the Executive and the House of Commons".
I shall put my case as briefly as possible.
I would first mention the curious, almost bizarre and unprecedented reporting in the newspapers last Thursday and Friday following the judgment by the court. Without exception the newspapers reported Denning fully but almost ignored the decision by the other two judges, which constituted a majority opinion of the court. In fact, the majority judgment was ignored and, curiously, it was also ignored by the Chamber. Therefore, the discussion and the questioning that followed the Attorney-General's statement was of a most curious and almost unbalanced nature. I believe that is the first reason why we should take an early opportunity of discussing the matter so that we can get some sense of proportion back into the issue.
I now believe that issues are looming large and the time is not far off when the House will be involved in much more controversial constitutional issues than up to now. I take it, Mr. Speaker, that none of this is sub judice because the Attorney-General has not yet decided whether he is going to the House of Lords.
It is essential that we have a debate in this Chamber on the character of that application and the basis of the Attorney-General's submission for appeal. Because of the majority ruling of the Court of Appeal judges, the Attorney-General can now make his application only on very narrow issues indeed. That is the only basis on which he can go to the House of Lords unless there are other people who have ideas about seeking leave to challenge the ruling of the Appeal Court itself.
I understand that the Attorney-General is considering only these narrow issues,

but they will have serious implications for some of the judgments that my right hon. and learned Friend will have to make from now on. There is, therefore, a good reason why the House should discuss the application, particularly if, as the Attorney-General believes—as you yourself, Mr. Speaker, do—that he is answerable to the House of Commons.
Questions have already been raised about that "answerability"—if that is the right word—being limited to 10 minutes a month. It does not seem that Members of Parliament have very much access to constitutional affairs of this size if that is our present basis for questioning the Attorney-General.
It is Denning who rejects the view that the Attorney-General has absolute discretion in these matters. But the other two judges said that in most of the areas discussed the Attorney-General had absolute discretion and was quite right to take his decision. All three judges concurred in saying that there were areas in which there should be some qualification.
The matter is urgent because we now know that there are some societies and organisations and some groups of lawyers who are discussing ways in which they can seek an injunction to prevent Members of Parliament from discussing very big race relations issues. The argument concerns preventing Members of Parliament from openly discussing race relations. That is an issue as controversial as some that could arise in industrial relations.
It is absolutely essential that we get right the use of the courts to prevent Members of Parliament from making statements. If we are to honour our obligations as Members of Parliament, and as a democratic Assembly, we should try to define clearly what we believe. We must get the issue of the Attorney-General's accountability right, particularly if my right hon. and learned Friend is called upon to answer about Members of Parliament making statements outside the House. We must decide whether they can be subject to rulings by the court in the way that some people are now proposing. That is the basis of my submission.
There are many other features—I know that you, Mr. Speaker, are familiar with them—to substantiate the urgency of the matter. Rather than detain the House


now and spell out all these issues, I would only say that they are extremely relevant.
When we are concerned about these sorts of constitutional issues, it is extremely urgent to take the opportunity to debate where this House stands in relation to the Attorney-General before he makes an application to the House of Lords.
Above all, that would allow us to correct the record and to ensure that people understand that no one is attempting to be above the law. No one is trying to do that. We are concerned that the courts should not be instruments for making law; nor should they become institutions capable of preventing free expression of opinion, particularly when involving Members of Parliament.

Mr. Speaker: The hon. Gentleman gave me notice this morning that he intended to raise this matter, and I am grateful to him. The hon. Gentleman asks leave to move the Adjournment of the House, under Standing Order No. 9, for the purpose of discussing a specific and important matter that he thinks should have urgent consideration, namely,
Following the Appeal Court judgment, to define the area of absolute discretion embodied in the Attorney-General and his relationship to the Executive and the House of Commons".
As the House knows, I am not required to decide whether the matter should be debated but whether it should take priority over other business. As the House also knows, I am not required to give my reasons. I have given thoughtful consideration to what the hon. Gentleman has just said and to his representations, but I have to rule that his submission does not fall within the rules of Standing Order No. 9 and therefore I cannot submit his application to the House.

Orders of the Day — INTERNATIONAL FINANCE, TRADE AND AID BILL

Order for Second Reading read.

4.20 p.m.

The Financial Secretary to the Treasury (Mr. Robert Sheldon): I beg to move, That the Bill be now read a Second time.
The Bill is concerned with increases in financial limits covering a variety of international activities, and there are a number of reasons why the increases in these limits are needed. First, there is the growth of the world economies. Second, there is the expansion of world trade that largely results from the increases in economic growth. Third, there are the increasing rates of inflation that we have seen not only here but elsewhere in the world at large. The financial limits that we see in the various parts of the Bill reflect these main changes as they have occurred throughout the world, especially in those parts of the world that are active in world trade.
The institutions concerned in this Bill and in so much of our international financial, trade and development activities are the International Monetary Fund, the Export Credits Guarantee Department in this country, and the Commonwealth Development Corporation. I should point out that since the last war we have been fortunate under a succession of Governments internationally who have accepted responsibility for a kind of development that has been almost unequalled in the history of the world.
As a result the means have been made available to feed the hungry and to help in the development of those less well-off countries and to promote suitable economic conditions. These are matters in which we in this generation should be proud to have played some part. The exceptional growth in world trade that we have seen is a reflection of the policies which have been pursued by the main countries. As a result, in post war years we have seen the trade in commodities multiply seven times and the increase in world trade in manufactured goods multiply 10 times: these are in real terms.
These are quite phenomenal increases which have been welcomed both as a cause and as a consequence of the economic growth to which I referred. They have been very much a cause of the economic growth because of the ability that they give so many of the countries concerned to increase their specialisation and to improve their standards of production and performance generally. Through the comparison which inevitably is made between the products of one country and those of another, they have led to competition in design, so that there has been this improvement in international standards not only in capital goods, which always existed previously, but more especially and more recently in the consumer goods of which shops throughout the world provide ample evidence. One further advantage that we have seen concerns the spread of international understanding as the products of certain countries become familiar in others.
The consequences of this economic growth following upon the increasing wealth that these countries have been able to acquire have led to increases in world purchases of manufactured goods steadily throughout the post-war years. Right up until 1973 it seemed that this process would continue indefinitely, with continuous expansion for the economic good of all. It was apparent that a number of countries were beginning to dovetail their contributions into the economic needs of the world as a whole, and there were signs that the changes in manufacturing output of very many countries were being geared in this way.
Then came the oil crisis and the consequential increases in the price of oil and commodity prices generally. The recession that that brought about was a profound one, and even now we see that recovery from that recession has still some way to go. This Bill is a modest but undoubtedly worthwhile contribution to the resumption in the growth of world trade which is essential to that recovery.
The Bill helps this in four main ways. First, we have the Export Credits Guarantee Department, which finances exports and the growth in exports and is crucial to our own recovery. But the financing of exports is not purely a matter for us. Though we see other countries

undertaking the same arrangements, we must not think of these as purely competitive. They have a competitive aspect about which we have to be naturally concerned, but they also help to provide finance for the world exchange of goods, from which we all benefit.
This Bill provides for an increase in the financing facilities of the Export Credits Guarantee Department from the present maximum level of £18·2 billion to £25 billion. At present they are running at a rate of about £17·3 billion, and provision has to be made for the natural expansion that will come. There are other ways of financing to which I shall refer later.
The next aspect provided in the Bill for those basic requirements which I mentioned concerns the Ministry of Overseas Development and its assistance to developing countries. Under the Commonwealth Development Corporation, the increase in its limits in the Bill will be from £260 million to £500 million, or by order to £570 million.
The third aspect covers the IMF quota increase. This is designed to help the financing of the balance of payments and to take some steps to avoid some of the threatened deflationary actions which might have come about to the disadvantage of all countries. The deflationary actions could have included—and this was a threat which it was important to avoid—not only competitive deflations but increasing restrictions on international trade which could have succeeded them. The Bill increases our contribution to the IMF from 2,800 million SDRs to 2,925 million.
The fourth aspect concerns the amendment to the IMF articles. This places upon members of the obligation to make SDRs the principal reserve asset, and it requires the Fund as well, under these articles, to dispose of one-third of its gold holdings. I pick out those two main aspects of the articles.
These are important changes which have taken place in the IMF since the setting up of the Bretton Woods Agreement in 1944. It is worth remarking that this is only the second amendment to the IMF since that date. I consider this a measure of the value of the work done 33 years ago, and the fact that this is only the second amendment is a tribute


to that work and a measure of the admiration and respect which I—and I am sure many others—would pay to those who set out to provide the international framework of the post-war years from which all of us have benefited.
In recent times, however, the Fund has had to contend with a number of new problems, not least of which have been the problems of the surplus funds arising from the increased price of oil. In these as in other matters the IMF has been an effective forum for international discussion, and it has been concerned with the introduction of the oil facility. Under this facility, $8 billion was borrowed and about $3 billion was obtained by the non-oil developing countries which otherwise would have suffered severely. This money has helped to prevent even heavier deflation with the consequential disadvantages to all the countries concerned.
The problem of dealing with surplus revenues acquired by the oil producers is still with us and is likely to remain with us for a long time. It will remain with us as long as those countries do not use this money, which comes from the sale of oil, for imports and their own development projects.
The counterparts of these very large surpluses of revenue which the oil producers are acquiring are balance of payments deficits of other countries of which we are one. The non-oil developing countries and the OECD countries have to bear the brunt of these deficits. It will be a long time before the oil producers import sufficient quantities of consumer and capital goods to offset these deficits, which are building up.
The big question here concerns the distribution of that deficit between the non-oil developing countries and the OECD countries. It also concerns the financing of that deficit. As long as some countries are able to ensure a balance in their balance of payments, the burden is not equally shared. This means that there is an even heavier burden for those countries which are not able to order their affairs in such a way as to produce a balance. This is still a subject of concern, and if the economic summit—about which much has been written today—takes place, this will be one of the main questions for discussion.
The decision to increase IMF quotas by one third will help considerably in financing these deficits. The quota increase will raise the Fund's resources to $45 billion and one of the problems facing the IMF is handling the difficulties arising from this. The main and newest problem is that of finding better co-ordination of floating exchange rates, which the world is learning painfully to live with. We must understand that floating exchange rates will be with us for some time and the problem, therefore, is how to get orderly variations in exchange rates and prevent the kind of competitive devaluations which were a feature of prewar Governments and which contributed markedly to slumps at certain periods.
Article 4(3) of the IMF places upon the Fund an obligation to exercise surveillance over exchange rate arrangements. This surveillance provides for the IMF to be informed of changes proposed by member countries and for consultations. Some people think that these provisions will be a long-term replacement for the Bretton Woods Agreement of 1944 concerning exchange rates. Personally, I believe that the aims are rather more modest than that and what we are seeing here is a basis for monitoring and co-ordinating exchange rates through the influence of the IMF. I would not wish to speculate on what it may lead to ultimately, and I do not think that such speculation is necessary at this stage.
Under this Bill the Commonwealth Development Corporation will acquire an increase in its borrowing limits. This is no more than a modest but valuable contribution to aid. Anyone who has taken part in our debates about the developing countries will know that there is an interdependence between developing and developed countries. This is something that we shall have to take more seriously in view of the present difficulties than we were prepared to consider in the past when the world economies were expanding continuously and were expected to continue doing so. This may lead to an extension of the Litvinov principle—that prosperity is indivisible.
At a time when our problems are great we must realise the problems of developing countries also and the dangers which a divergence rather than a convergence


of living standards can cause to the relationship between different types of countries. We must continue our general aid policy of giving aid to the poorest countries and to rural development within those countries. This will help the poorest people in the rural areas to develop their natural resources. That is the best sort of help to give them.
The Commonwealth Development Corporation will continue to contribute finances as well as management of projects, and this is an area which the Parliamentary Secretary to the Ministry of Overseas Development will deal with when he winds up the debate.

Mr. Tim Renton: In view of the challenging remarks which the Financial Secretary has just made about the need for greater interdependence between developing and developed countries, could he tell us what attitude he expects the Government to adopt in March at the renewed common fund negotiations specialising in commodity prices?

Mr. Sheldon: I shall say something about commodity prices later. If the hon. Member is not satisfied with my remarks, he can take the matter up with me then.
The most encouraging aspect of the acceptance of international responsibility for development, which was a feature of the post-war world, was the number of institutions which were set up to provide practical assistance in this area. We know of the valuable work being done by the World Bank, which is concerned mainly with the big programmes of assistance. We know also of the work of the International Development Association, which is concerned with soft loans in these areas, and of the International Finance Corporation, which deals with the more commercial types of development. All these institutions have an important part to play, but the rôle of the IMF itself in the developing countries is not often mentioned in these debates. When one looks at the major contributions derived from the creation and liberalisation of the compensatory financing facility which finances fluctuations in the export earnings of primary producing countries, which were beyond their control, one sees that this was a major step forward in recent years.
Total drawings by the non-oil developing countries amount to $2·5 billion at low interest rates—about 4 to 6 per cent.—repayable over three to five years. The countries which have benefited from it include the Ivory Coast, Zaire, Tanzania, Peru, Kenya and a number of others. The money is used to finance export fluctuations due to changing conditions in the export potential for a wide range of primary products and has provided enormous help. It also signals some of the ways in which further assistance may be made available.

Mr. John Lee: I do not want to be contentious, because the Financial Secretary is putting the case in a dispassionate and thoughtful way, but would he say what is being done to try to mitigate the damage caused by Common Market tariff barriers against the products of primary producer countries?

Mr. Sheldon: I do not think that my hon. Friend, who, I know, wishes to view these matters dispassionately, has taken account of the advantages that some of these countries have. The wide range of institutions and organisations that can tackle so many of these matters of concern and the substantial funds that have been made available have been of enormous value at a time when it is difficult for such funds to be spent in the way that have described.

Dr. Jeremy Bray: Is it Government policy that the IMF facilities should be available to developing countries to pay contributions to commodity stabilisation funds which are established in addition to the present facilities which are almost unusable?

Mr. Sheldon: I do not agree that they are unusable. The compensatory financing facility deals with $2·5 billion, which is a substantial amount. There is always scope for development, depending on how these matters proceed.

Dr. Bray: The compensatory financing facility is designed to buffer countries against the overall fluctuation in their export earnings. There is a separate IMF facility for financing contributions by developing countries to commodity stablisation funds. That is a different issue, and the terms under which such finance


is available are so restricted as to mean that the finance is hardly used.

Mr. Sheldon: I have already dealt with the details of many of the funds which are available in this respect. I see the point that my hon. Friend makes. He will know that funds are available to developing countries for assistance with their balance of payments difficulties in the same way that they have been made available before, except that when the quota increases—possibly as a result of the measures in the Bill—more funds are available for use in a number of ways, including those that my hon. Friend might have in mind.

Mr. Terence Higgins: Is the Minister sure that what he has just said is right?

Mr. Sheldon: The IMF can lend money to developing countries for assistance with their balance of payments difficulties. The increases in the quotas will help them to make arrangements to increase the amounts of money so available.
Let me say something about the IMF as it concerns the extended fund facility which was recently established and which is to finance medium-term development plans. There have been a number of agreed programmes, in particular those concerning Kenya and the Phillipines, and covering the longer term. The longer-term facilities cover a period of four to eight years and balance of payments assistance can be given under them. Perhaps I should explain that my hon. Friend the Under-Secretary of State for Trade is unfortunately absent this evening at a meeting elsewhere in the House.

Mr. Peter Viggers: Which Ministers will pilot the Bill through Committee? There are three quite separate matters in the Bill which should not be covered together. We hope that there will be sufficient Ministers present to advise the Committee on all aspects.

Mr. Sheldon: I can give the hon. Member an assurance on that. My hon. Friends the Under-Secretary of State for Trade and the Minister of State for Overseas Development will help to pilot the Bill through Committee. They have in common, however, those international aspects of the Bill which increase the moneys available.
Perhaps I may now deal with the export credit provisions. There is always the danger that the terms for export credit will be seen purely as competitive improvements between countries without attention being paid to the advantages which accrue to all countries from the terms of credit. We should like to see them all co-ordinated so as to avoid at least some of the frequently excessive competition in these matters.
The Bill deals with the medium and long term, and the length of term and the levels of interest are of course, major matters. An essential element in this trade is that Government involvement must always be present to support the efforts of our exporters in meeting the country's needs in the balance of trade.
The Export Credits Guarantee Department is nearly 60 years old and it continues to play a vital rôle. At present it insures about 35 per cent. of exports, totalling about £8·5 billion, of which three quarters is for cash for short credits. A number of changes in export credits have been in preparation for some time. On 15th December last my right hon. Friend the Chancellor said that it was necessary to reduce expenditure in this area. This will be achieved partly by an agreement with the clearing banks that they should provide more of the financing than they have previously.

Mr. Ian Stewart: Will the Minister clear up one point which appears to present a conflict between what he said and what is in the Explanatory Memorandum? It says that the present limit is £12,200 million, to be increased to £25,000 million. Earlier the Minister mentioned the figure of £18,200 million and drawings of £17,000 million. Will he relate these last figures to those in the Bill?

Mr. Sheldon: Provision was made in the Act to increase the figures by order, and orders to increase the amounts were carried through the House. I was dealing with the position which obtained after those orders took effect.
It will be necessary for the clearing banks to provide more of this finance. There are savings to be obtained by switching to foreign currency financing ECGD will be providing improved support for contracts which are regulated in foreign currency. A number of details


about this will be made available tomorrow. Details of increased premia are being notified to policyholders today. It is not expected that these will have any significant effect on the demand for ECGD services.

Mr. Cecil Parkinson: Why are the details of the new arrangements to be made available tomorrow when the House of Commons is discussing the Bill today? Might it not have been more polite to the House to reveal the new arrangements today so that hon. Members have this opportunity to comment upon them?

Mr. Sheldon: I sought to give the House the basic information it requires in order to debate the Bill. The hon. Member will find that the details published tomorrow do not add much to the provisions which I have announced.
Hon. Members will want to examine a number of these details in Committee, and therefore I make the offer that if there is any particular area of interest upon which an hon. Member wishes information, I should be happy to make available whatever I can between now and the Committee stage. If I can be of any assistance, I shall be delighted to help.
I look forward to the measure being subjected to detailed discussion and to the scrutiny that, no doubt, both Members opposite and on my own side will wish to give it. I look forward to the passage of the Bill.

4.51 p.m.

Mr. Cecil Parkinson: I thank the Minister for his financial tour d'horizon. I hope he will not take it amiss when I say that, following his speech, I now find an already complicated Bill even more complicated. I entirely agree with my hon. Friend the Member for Gosport (Mr. Viggers), who pointed out to the Minister that the measure is really three Bills rolled into one. Perhaps some of the Minister's difficulties in making a co-ordinated speech stemmed from that fact.
It is a pleasure to see Ministers from both the Treasury and the Ministry of Overseas Development on the same side for a change. It has been a long time since they have been prepared to

share the Treasury Bench. I also thank the Chief Secretary to the Treasury for his non-attendance.

Mr. Deputy Speaker (Sir Myer Galpern): I hope that the hon. Member will refrain from making remarks that could lead to Members leaving the Chamber.

Mr. Parkinson: Thank you, Mr. Deputy Speaker. I will do my best.
The Bill deals with three financial institutions—the International Monetary Fund, the Export Credit Guarantee Department and the Commonwealth Development Corporation. The smallest section of the Bill, in terms of financial implications, is that which deals with the IMF. The Bill simply increases our quota to the IMF by about —85 million, but in addition it ratifies the new articles under which the IMF will operate once a sufficient majority of its members has approved them. The Bill offers Parliament an opportunity to discuss the future of the IMF and the IMF's future ways of working.
The new IMF articles recognise that the old articles had gold as the principal standard of value, that fixed exchange rates were the other main feature and that this has been overtaken by events. It is significant that market forces have forced changes, and that the IMF has had to modify its rules in order to meet them and not the other way round. The Financial Secretary's speech gave the impression that this had been planned by the IMF and that the IMF had been in charge of events throughout, but that is not the case. The need for new articles has arisen because the old articles were overtaken by events. It has been demonstrated that the old IMF was not an instrument for controlling world monetary forces but simply an instrument that can be used to alleviate some of the more unexpected developments in world forces.
Many people feel that the new articles represent a temporary compromise and that they do not mark the end of discussion about the IMF's future but are simply a breathing space during that discussion. There are two main schools of thought on what the IMF will become and what its future will be. These were summarised recently in the Economist and the Financial Times.
There was an interesting article about the attitude of the new Carter Administration to the IMF in the Economist of 17th January, under the headline
Do we Need an IMF?
The article argued that the IMF no longer controls the world's money and that it is simply a bank that should be merged with the World Bank and recognised for what it is. Indeed the Financial Times on 15th July pointed out that it was possible to argue that the IMF must be seen from now on primarily a source of financial assistance and not as an instrument for world government.
On the other hand Jeremy Campbell, in an interesting article in the Evening Standard, recently reported on a series of interviews that he conducted in Washington with key members of President Carter's new Administration. He told of their great hopes for the IMF. Mr. Richard Cooper, who is the new Under-Secretary for Economic Affairs, was quoted as saying that he sees the IMF—
expanding to become a central bank for the world, able to create money, not just to borrow it.
Papers have been produced for the Trilateral Commission, of which no fewer than five of President Carter's Cabinet were members and of which the President was a member himself. Various papers foresaw a need for the power for the IMF to be expanded to make it less a follower and more a leader of the large nations.
I would not like to predict what the IMF will become, but I would have thought that past experience suggests that eventually it will have to react to events and that it will not be an instrument for moulding them. There is no doubt that the IMF's rôle has changed and that its future rôle remains to be decided. What is beyond doubt is Britain's changed situation within the IMF. Superficially, the change is slight.
Under the Bill, our quota is increased by $125 million of special drawing rights. That represents about £86 million. The new quota for the United Kingdom represents a small reduction in the overall quotas of the IMF and a small reduction of our voting powers within the IMF.

This adjustment was in common with other developed countries. As the Financial Secretary knows, it was necessary to allow an increased share of quota for OPEC countries and to maintain the share for developing countries. We still have the second largest quota after the United States, and many people may feel that this is a slightly flattering reflection of our true standing in the financial world.
Our quota is 40 per cent. larger than that of West Germany and 80 per cent. larger than that of Japan, but he would be a brave man indeed who suggested that those quotas reflected the relative positions of the three economies. The superficial change conceals a massive change in our true position and standing within the IMF. In 1945, Britain's second place in the IMF represented its position as the second biggest country in the scheme of things. It represented our position as principal contributor to the Fund and our influence in it. Now it represents our position as the Fund's principal creditor and dependant.
The Labour Government see the Fund no longer as an organisation in which Britain can play a part in producing a more orderly world monetary system but as yet another source of credit and another place from which we can take out more than we put in. The truth is that we are pre-empting a huge slice of the IMF's resources, at a time of world recession, in order to prop up a standard of living that we are not earning. We are competing with the developing world for an ever greater share of the world's scarce financial resources.
There is another change in our circumstances which has been brought about by the Government. One aspect of the approach of successive Labour Governments to the IMF which many of us have resented has been their use of it as a sort of international monetary consultant for our country. I would not go as far as the American writer who said recently:
In the last seven weeks you have seen Britain totally lose her sovereignty and surrender the management of her economic policy to the IMF",
but our ability to influence them and our standing in the world's financial circles is not enhanced by our need to borrow.
The Government will have to learn that their policy of scraping the bottom of every credit barrel is doing immense damage to Great Britain's long-term prospects. No one needs to learn that more than the Chancellor of the Duchy of Lancaster—the arch borrower in the Government's scheme of things.
I was a chartered accountant in the City for nearly 15 years, and from time to time we had to buy companies "off the shelf" in an emergency. For £24 one could buy all the statutory books and equipment of a limited company. One of the best known firms selling such companies had offices in the Strand and, as a way of enticing people to buy its companies a slogan in the window stated:
Directors of our companies have unlimited borrowing powers.
I sometimes think that the Chancellor of the Duchy of Lancaster has bought one of those companies and is running this country's finances from inside it.
The next part of the Bill deals with the Export Credits Guarantee Department. It increases the Department's limits and introduces a new support facility for export contracts in foreign currencies. Anyone who examines the accounts of ECGD is struck immediately by the immense growth in its business. Barely two years ago its limit was £7 billion. Just two years ago the Government came to the House to increase that to an overall limit of £21·2 billion and expected it to last for at least five years. They are already back and extending the limit to £56 billion.
An even better measure of the rate of growth of ECGD business is the fact that since the Department went into credit insurance business in 1930 it has written a total of about £50 billion worth of business. We now expect current business to total £56 billion at any given moment within five years. That is more than all the business transacted by the Department since it came into existence 46 years ago. Even allowing for inflation, that is a massive increase in anticipated business and I congratulate the staff of the Department on the work they have done in making it one of the most admired institutions in this country.
I read with interest the last debate in Standing Committee on an allied subject when the Minister pointed out with pride

that many major countries had sent people here to examine the workings of the Department and that they had learned a great deal.
The growth has been immense in cash and volume terms and has been notable for the variety of developments and the number of new schemes brought forward by the Department in recent years. The 1975 report alone contains details of three new schemes which had been introduced during the year and which were operating successfully. There is a further major expansion of the Department's business in the Bill.
Is the machinery of the Department capable of coping with such a huge anticipated expansion of business? There is a risk element in the Department's work, otherwise people would not need to go there for policies and help, and there is pressure for exports. Has the Department the facilities to maintain its high standard of processing and its low record of risk-taking which have been its hallmarks to date?
Can the Minister tell us whether he is satisfied with Parliament's control over Section 2 business—the so-called national interest business? It has already increased enormously. Has the Department the technical expertise to evaluate the huge projects which are tending to come forward under this heading?
The ECGD was recently involved in its biggest ever project totalling £212 million. Many of us feel that it is slightly incongruous that the Secretary of State for Industry must come here for approval of an investment of more than £5 million while the Secretary of State for Trade may, with the consent of the Treasury alone and with no consultation with the House, agree to underwrite business as big as a single item of £212 million.
Does the Minister agree that there is something rather strange about having a board to advise on credit insurance while having no formal consultative board to advise on Section 2 business? I appreciate the Department's problems, and we do not wish to hinder it in taking commercial decisions which have to be made quickly, but it seems strange that Parliament should demand such controls in one area yet apparently be quite happy with no controls of any kind in another sector.
I notice that in the last available accounts of the Department—for 1975–76—it is admitted that the Department is a little concerned that its reserves in the commercial part of the accounts are not as large as it would like. The Department says that it would like to have reserves of about 3 per cent. of the amount of risk cover, but that its reserves are only 2·4 per cent. That does not sound much until one goes into the figures involved.
The Bill envisages a fantastic increase in the amount of business in which the Department is likely to be involved being underwritten. The Department has already admitted that its reserves are not adequate to deal with the business which it is already doing. What plans has the Minister or the Department for improving the reserve ratio?
The other main change in the ECGD arrangements envisaged in the Bill is a brand new facility to cover commitments in foreign currencies. We understand the reasons for that. They relate more to the Government's public sector borrowing requirement and public expenditure problems than to the problems of exporters. The details will have to be discussed in Committee, because, by arrangement they will be available tomorrow.
The new facility suggests that the Government expect United Kingdom interest rates to remain well above the export rate. Will the Minister in winding up the debate confirm that that is so? If the Government do not expect United Kingdom commercial rates to remain well above the export rate, there would seem to be little requirement for this facility.
The industry is concerned and will be waiting to see the details of the scheme. The industry fears that the scheme could be more expensive than existing arrangements. Perhaps I may quote one example which has been given to me. Foreign currency loans usually give rise to an annual or even six-monthly commitment fee. Sterling loans usually have an initial one-off commitment fee. The Minister will appreciate that that could represent a substantial increased expense for the exporter.
Before ending this section of my remarks about the ECGD, I should like

to return to a subject which has been raised at Question Time and was raised in Committee on the Export Guarantees Bill in 1975. I refer to exports to Eastern bloc countries. I notice that in the accounts of the ECGD, where the Eastern bloc Communist States are euphemistically called "centrally directed economies", there has been a substantial increase in business with Iron Curtain countries. In a very fine speech in the Standing Committee to which I referred, my hon. Friend the Member for Blackpool, South (Mr. Blaker) pointed out the implications of increasing East-West trade.
On every occasion when the subject has been brought up, in particular the question of the large line of credit—nobody is quite sure what the right hon. Member for Huyton (Sir H. Wilson) arranged with the Russians—had been the subject of fairly substantial discussion in the House. The Minister's answer is always the same, and I understand it. It is "If we did not offer the credit, somebody else would. We need the business. It is better to trade than to fight." The Minister could recite the arguments as well as I can. I appreciate the Department's difficulties.
I wonder whether the Minister saw the article in the Sunday Telegraph last week in which it was estimated that the Soviet Union now has a net indebtedness of $18 billion to Western countries and that the total indebtedness of Eastern bloc countries now totals $45 billion. Does the Minister recognise that, at a time when we are being forced to cut defence expenditure to release resources for industry and export, the West is offering huge credits to Eastern bloc countries which enable them to maintain their defence expenditure and arms programmes and to proceed with their industrial development at the same time?
After listening to Ministers explaining that defence cuts are necessary to release resources so that exports and industry can have a bigger share of the resources available, I find it strange that at the same time the West as a whole is making these massive credits available to Eastern bloc countries, thereby enabling them to have their cake and to eat it. Does not the Minister agree that it is time that Western countries got together to discuss the


strategic implications of the trade race in which we are involved?
The third and final element in this part of the Bill is to increase the borrowing powers and scope of the CDC and to restructure its capital by writing off debts arising from projects which failed—many of them more than a quarter of a century ago—and deferred interest which will never be recovered. To introduce a personal note, I found it extremely interesting that the person who introduced the arrangements which we are in the process of writing off today was my predecessor at Enfield, West, the late Iain Macleod, whom everyone in this House greatly admired and misses.
Anyone who reads the CDC report and accounts cannot fail to be impressed by three outstanding features. The first is the CDC's support for a huge variety of less than grandiose schemes, the majority of which are successful. The second is the local participation, which is a regular feature of its activities. The third is the stress in its terms of reference that projects should not only increase the wealth of the territory in which they are located but yield a reasonable rate of return on the money invested. The CDC has an excellent record and, even in times of economic difficulty, deserves the continued support of the House.
I should like to put three questions to the Minister which relate to the work of the Department. First, will he tell us whether and to what extent the CDC will bear its share of the cuts in our aid programme which the Chancellor announced to the House in December?
Secondly, in Cmnd. 6544—"The British Aid Programme in 1975"—Her Majesty's Government reported to the OECD that
it would increasingly seek to place its new commitments into the poorer countries, and into renewable natural resource projects—that is to say, in agriculture, forestry and fisheries—benefiting people living in rural areas.
Will the Minister give us an interim report on how that programme is progressing? I know that the programme is to be reviewed in mid–1977. However, will the Minister give us a report on how the new emphasis in the CDC's work is working out in practice?
Thirdly, in the Second Report of the Select Committee on Overseas Develop- 
ment, House of Commons Paper 705, the Select Committee recommended that the CDC should not expand its assets in the Caribbean, but should seek an alteration to its charter which would allow it to operate in a limited number of countries in Central and Southern America. I appreciate that the Minister does not need to alter the charter for CDC to operate in that area, but I hope that he will tell the House of his Department's reaction to the Select Committee's interesting suggestion.
As I said at the beginning of my remarks, this is not one Bill but three. I must admit that during the past week there have been times when I have cursed that fact. Nevertheless, whether it is one Bill or three, the intentions behind this measure and the measures that it outlines are worthy ones that the Opposition will support, although we shall question them in detail in Committee.

5.20 p.m.

Mrs. Judith Hart: In his analysis of the Bill the hon. Member for Hertfordshire, South (Mr. Parkinson) said that the Bill is constituted of three parts, but I believe that it has four parts. There is a fourth aspect to which I shall refer.
I say initially that I wholly endorse almost everything that has been said by the hon. Gentleman and my right hon. Friend the Financial Secretary about the Commonwealth Development Corporation. It performs excellent work. I think that the House will be aware that in order to adapt its guidelines to those of the Government White Paper on poverty oriented aid strategy in 1974–75 there were slight changes made to make it possible for the CDC to play a more effective rôle in such an aid strategy so that the whole concept of the CDC paying its way and getting the best possible return did not necessarily have to apply to every individual project.
The changes enabled it, as in the case of nationalised industries, to pay its way taking one thing with another. That was the only way of making it feasible for the CDC to support certain projects in the rural sector of very poor countries which might not be able to achieve a commercial return.
A supplementary question to the question posed by the hon. Member for Hertfordshire, South, is to ask what projects the CDC has undertaken, has agreed to undertake, or is planning to undertake since the new guidelines emerged and since the White Paper was published, directed towards benefiting the poorest countries and the poorest people. It would be interesting to know how that is working out in practice. I entirely endorse all that has been said about the CDC being an efficient organisation. It is an extremely good organisation and entitled to the full support of the House.
When I said that the Bill has four parts I was referring to an element that has not so far been mentioned—namely, Clause 7, which permits the Overseas Aid Act 1968, under which payments can be made to regional development banks, to be amended so that international development banks not solely of a regional character may be supported. That seems to be an extremely sensible proposal but one or two questions have to be asked. I hope that my hon. Friend the Under-Secretary of State will be able to give us a clear picture when he replies to the debate. It would be good for the House to have explained to it exactly what is in mind. It would be good to have my hon. Friend tell us the recent developments in the regional and development banks that make it advisable to include such a provision.
There is a particular and specific point that I would like to put to my hon. Friend. I wish to be reassured that Clause 7 is not in the Bill conceivably to enable a British Government to give support to the so-called Kissinger international resources bank, should that ever get off the ground.
Perhaps I should explain what I have in mind. At the time of UNCTAD in Nairobi last spring Dr. Kissinger arrived hot-foot with a new proposal from the United States Treasury. The intention was to replace some of the new international economic order proposals of the group of 77 developing countries. It was a proposal for a new international development bank: I suppose it would be called that. It was a proposal that would come within the provisions of the Bill. It was proposed as a new international resources bank.
Nothing was known about such a thing in Nairobi at the time but it had been discussed in Paris. The weekend before UNCTAD began, I carried from Paris to Nairobi a copy of the international New York Herald Tribune which contained a report of a United States Treasury briefing in Paris about the Kissinger international resources bank proposal. It caused a great deal of consternation in Nairobi. It was subsequently made extremely clear by Dr. Kissinger that what he had in mind was a new development bank which would be financed primarily by private capital, which would provide investment for foreign firms and overseas companies investing in developing countries on condition that their security was guaranteed. In other words, it was clearly intended by Dr. Kissinger as a method of safeguarding the investment of multinational corporations in developing countries. He was quite frank and clear about that.
There can be different views about such a proposal but it can be said as a matter of fact and not as a matter of judgment that it was not received by the developing countries with great acclaim. When we consider the position we are bound to recognise that a greater transfer of resources to finance mineral, industrial and agricultural development in developing countries is required. We already have the institutions of the World Bank, which on a profit-making basis can operate through the International Finance Corporation and on a concessionary basis through the IDA, which we correctly cover in the Bill.
I want an assurance that there is in no one's mind the idea that by including Clause 7 we are paving the way for a possible resurrection of the Kissinger international resources bank. That is a concept that I doubt will be resurrected under the new Carter Administration, but I want an explanation of why it was regarded as necessary to extend the present provision so that it covered international banks.
My third point is not so much a matter of questioning but something that dismays and disappoints me. My understanding is that the 1975 Act, which is mentioned in the Bill and which the Bill amends, was in itself a consolidation measure, and that included in the Acts which were


consolidated in 1975 was the Overseas Investment and Export Guarantees Act 1972. I do not know whether my hon. Friend is aware that the 1972 Act, which was introduced by a Conservative Government, was not enacted before the Labour Opposition had strongly urged certain amendments in Committee.
We tried extremely hard to have incorporated in the Bill codes of practice affecting overseas investment insurance, which is, of course, administered under ECGD. We were very anxious that, if we were extending the provisions of the ECGD to include this new element of insurance for British companies investing overseas, along with that should go a proviso that, particularly in relation to developing countries but possibly in relation to all countries, and certainly South Africa, there should be a code of practice as a condition of having the insurance cover.
I am very sorry to see that the Government have not taken the opportunity in this measure of introducing the idea of codes of practice, which we pressed so hard when in opposition and on which we were narrowly defeated. In Committee it was not a tremendous party-political battle. It was very much a matter of marginal judgment. Nevertheless, we did not win our amendment. It seems to me that all the experience since 1972 has underlined the relevance and the importance of covering codes of practice under the insurance provided through the ECGD to overseas investment.
Many countries have codes of practice. Indeed, I remember listing a number of countries which had a similar scheme whereby they offered official insurance cover for firms investing overseas. I remember citing a number of countries, including the United States, Sweden and the Netherlands, which actually took for granted that they had this code of practice provision as a normal condition of extending insurance cover and thought that there was nothing odd about it.
It covers various matters. One has in mind, on the one hand, developing countries, and, on the other hand, in very particular specific terms, the problems that have arisen in the last year or two in relation to British-based companies that invest in South Africa. One has in mind

the codes of practice which perfectly normally govern, in relation to the investment of other countries, multinational corporations, such matters as the recognition of trades unions, a reasonable level of wage rates, hours and conditions of work, and training programmes for management. All those are items which have caused such great distress in relation to present practices of some British firms operating in South Africa. This matter becomes more and more relevant as trans-national corporations become the major overseas investors and as our own export of capital becomes more and more capital from British-based multinational corporations rather than capital from British-based medium-sized or small firms.
Therefore, I very much hope that the Government will themselves undertake to introduce the concept of codes of practice into the Bill. I should like to tell my hon. Friend the Minister where in the Bill, to the best of my advice, it could easily be included within the Long Title and the Financial Resolution. It is in Clause 4 as an extra condition applying to the Export Guarantees Act 1975. I hope that it will not be necessary to move amendments to that effect in Committee but that the Government themselves will tell us that they realise that this is an omission from the Bill and that they will ready themselves to introduce amendments in Committee.
Having said that, I completely support the general principle of the Bill. I think that the provisions in relation to the IMF and the CDC and the other matters that the Bill covers are perfectly reasonable and very well understood in the House, and one gives the Bill one's support.

5.35 p.m.

Mr. Reginald Maudling: I agree with the Financial Secretary that this is a useful measure which should be welcomed. I hope very much that the House will pass it.
I congratulate very warmly my colleague and parliamentary neighbour, my hon. Friend the Member for Hertfordshire, South (Mr. Parkinson), on what I believe was his first foray to the Dispatch Box. I shall take up with him later one tiny point about the trilateral commission in Tokyo, from which I have just returned. However, apart from that his speech was excellently thought out and very well


documented. It was a model of the sort of speech that should be made from the Opposition Front Bench on an occasion such as this Bill.
I want to ask the Minister about three specific points that are not related to one another but are of relevance to the Bill. First, what has happened to the idea of surplus capacity aid? I am interested in that because it is an idea that I cooked up when I was President of the Board of Trade a long time ago. It was not very much favoured by the officialdom at the time, but it seems to me a good, commonsense idea by which one could provide, from a country with a difficult balance of payments situation, maximum aid to the developing countries.
The idea is roughly this. One says to a developing country that wants help, "If you want sterling convertible to hard currencies, we cannot do much. If you want sterling tied to British goods generally, we can do a lot more. But if you want sterling tied to a lot of goods for which we have surplus capacity already available, we can do even more to help you."
Under that concept we gave a great deal of aid to West Africa. I remember ships for Ghana and a large consignment of steel rails for, I think, Nigeria. That seems to me to be a sensible idea that might have relevance at present. If our desire is great to help developing countries but is constrained by balance of payments problems that are definite and severe, can we not arrange with them to give them more aid on condition that they take it in a form which we can easily provide, either from surplus stocks or surplus unused capacity here?
That is a concept that is of value. I do not know what has happened to it. I suspect that it may have been strangled over the last few years somewhere in the bowels of the Treasury. I should like to know from the Minister whether the general principle of development aid being taken in a form in which we can give it with the least cost to ourselves and, therefore, can give more of it is still acceptable to the Government as one of the principles for determining the quantum of the aid that we can give to developing countries.
My second point concerns the promotion of British trade overseas, particularly

in what are called jumbo projects. More and more throughout the world, particularly in the Middle East, one sees enormous petro-chemical complexes and construction projects arising which could create for British exporters great benefits.
I have just returned from Saudi Arabia after another visit. I wish that I could declare an interest: I have been trying my best to promote British exports there but without much success so far. However, I was seriously talking to Ministers in the Government there, and they want to do much more business with Britain. They recognise, however, as we do, the very serious handicaps that fall upon our exporters when it comes to dealing with very large projects indeed, the jumbo projects, by reason of the problem of performance bonds and the problem of joint and several liability.
I know that the Government are well aware of these problems. They have been studied by many bodies. However, this seems to me a very urgent matter indeed. A great deal could be done here by collaboration among Government, the insurance industry, finance and British manufacturers. There is an enormous amount of business to be had in the next few years in the Middle East in these sorts of projects. I hope that the maximum effort can be put behind getting some arrangement between the Government and the other interests concerned to see that Britain gets its share of these contracts, which, on our technical and efficiency performance, we certainly could win.
My third and only other point echoes what my hon. Friend said about credit to the Soviet bloc. I find this a very difficult and an extremely important problem. I hope that we can have from the Government an explanation of their attitude to the principle involved. As my hon. Friend said, the Soviet bloc has in recent years borrowed over $40 billion from the West, and a large proportion has gone to the Soviet Union.
That is a vast transfer of capital which gives enormous strength to the Eastern economies through the acquisition of finance capital and the acquisition of technology. It means that their economies have grown stronger, and, because their economies are stronger, they can spend more on arms. If they spend more on arms, we have to spend more to defend ourselves against them.
Can that possibly make sense? I imagine that a visitor from another planet would think that we had gone mad. Probably, as my hon. Friend said, there is an argument for saying that the process is competitive: if the French do something, we must do something, or if the Germans or the Italians do something, we must do something. But cannot we get together on this matter? The totality of the transfer of resources in finance capital and technology from the West to the East has in recent years been so great as to add enormously to the burden of necessary defence expenditure that we in the West must carry.
Those are the three matters which I raise. What is happening about surplus capacity aid? What are the Government doing about jumbo projects, performance bonds and joint and several liability? Third, what is the Government's basic policy regarding what appears to be the lunacy of transferring capital to those who can use it so as to require us to build up our own defence expenditure?

5.41 p.m.

Dr. Jeremy Bray: The right hon. Member for Chipping Barnett (Mr. Maudling) has referred to performance bonds, and I, too, have had the subject raised with me by several large contractors. I asked them whether they had been to the city. I knew that one of them was owned largely by an insurance company. Had that contractor been even to the insurance company which owned it? I was told that it had not. I wrote to the insurance company to ask "What about it?", and its reply was not very full or adequate.
I then raised the matter with the British Insurance Association, whose members have vastly greater capacity than has Lloyd's to take on new business, and I understand that some of the bigger companies are now beginning to look at the provision of performance bonds, wondering why no one had raised the matter earlier. It seems an extraordinary example of breakdown of communication between industry and the City, and even within the City, itself, as well as between the Government and the City. I very much hope that the Under-Secretary of State will be able to deal with these points and tell us what steps are now being taken by the big insurance companies on

the provision of performance bonds, which, as the right hon. Gentleman rightly said, are a crucial element in promoting our exports to the Middle East.
I shall speak mainly about the International Monetary Fund. I have no objection to the Bill. As the Financial Secretary said, it presents only the second set of amendments we have had since Bretton Woods, and, although there have been other opportunities to review the workings of the Fund, this opportunity is none the less very timely.
Our direct experience of the IMF suggests to me that we need to look at its operations for more deeply than the Financial Secretary was able to do in his necessarily brief review. If we run a heavy deficit, and if we finance that deficit by heavy borrowing, mainly from OPEC countries, we can hardly be surprised if later on there is a collapse of the exchange rate, with consequent effects on our domestic economic policies and serious results not onlny for inflation but for our public expenditure plans.
Faced with domestic economic problems of that kind, we cannot seek a soft option from the International Monetary Fund, but I seriously question whether the particular conditions which the IMF has attached to its loan are not shortsighted, ineffective, misconceived and generally a bit masochistic. I discussed this question at length in an article published in the New Statesman on 14th January. Were this the Senate of the United States, I should read that article into the record, but, since we are not, let me state briefly my understanding of how the IMF works.
The IMF asks Britain, in the sort of state in which we are, what our expectation is for the balance of payments deficit and what are the assumptions on which that expectation is based. It then cuts the rate of growth of GDP until the cumulative deficit matches the amount of money which we are seeking to borrow. That gives a trajectory for the economy, a set of public expenditure projections, tax assumptions and so on.
The IMF then fastens on one aspect of that overall projection, taking the implications of that projection, which, if our expectations are fulfilled, will result in our being able to tide over the deficit in our balance of payments and repay


the loan according to our commitments. It fastens on one aspect of that overall economic scenario, and that one aspect is what it is pleased to call the domestic credit expansion.
That concept is almost unknown in economic literature outside the IMF. It was, in fact, invented by Mr. Polak, who is—and has been for almost 20 years—the director of research in the IMF, and he published it in the IMF Staff Papers in 1957.
Mr. Polak made two very simple assumptions in justifying the concept: first, that there is a constant velocity in the circulation of money and. second, that there is a fixed ratio of imports to GDP. The idea is simple. If one wants to control imports, one simply cuts the money supply. There are no proper time lags in the system, there are no uncertainties, and there are fixed ratios. It is the simplest possible gold standard, fixed exchange rate, quantity theory of money model that anybody could conceivably dream up.
An argument may be put, as the Treasury put it in reply to the hon. Member for Hazel Grove (Mr. Arnold) last week, that
Discussions with the Fund on economic forecasts are not conducted exclusively on the basis of any single economic model. In the case of the United Kingdom, full account is taken of the Government's own forecasts as well as of other relevant sources."—[Official Report, 24th January 1977; Vol. 924. c. 4091]
Indeed, they are. As I have said, the original forecasts are provided by the Treasury. But the enforcement of them is entirely by the very crude instrument of domestic credit expansion. If it is said that it cannot possibly be as crude as that, why did the Chancellor say in paragraph 18 of his Letter of Intent that we
accordingly, intend that domestic credit expansion should be kept to £9 billion in the 12 months ending 20th April 1977 and to £7·7 billion in the 12 months ending 19th April 1978.
Not relying merely on that, I pursued the matter further. During the IMF negotiations, I visited Washington for discussions with people closely associated with the new United States Administration, and, with the good offices of the Government, I had discussions with Mr. Polak at the headquarters of the International Monetary Fund. Mr. Polak not

only confirmed the principles as I have outlined them but said that the system worked and had worked in hundreds of cases over the past 20 years.
The reason why it works is the same as the reason why Procrastes' bed works: if people transgress their commitment, their money supply is squeezed and squeezed until they fulfil the commitment. If one's purpose is merely to achieve a positive balance of payments, even with zero growth in the economy, high unemployment and no investment, of course it works. But is that sensible?
What is the practical import of all this for our present situation? It is that we are committed to rates of growth below our productive potential up to 1979, and therefore to a level of unemployment which is likely to go on rising until 1980. Furthermore, if we try to improve on this, the DCE limit will force us back. If we try to increase our investment, it can happen only if it comes out of consumer expenditure. If we increase our investment while not damaging our balance of payments, which is plainly what we should like to do, the DCE limit will force us back and restrict our growth of consumer expenditure. If we try to achieve higher levels of productivity, the only effect must be to increase the levels of unemployment.
What kind of basis is that to give the Chancellor of the Exchequer to take to the leaders of the TUC tomorrow night? Will he be able to convince them of the continuation of a viable incomes policy?

Mr. John Nott (St. Ives): Stop inflation.

Dr. Bray: The hon. Member says "Stop inflation". Does he realise that the IMF working to the Polak model is not interested in inflation? The IMF can happily cope with South American situations and their inflation. It does it by using the Polak model. That means that one can be totally irresponsible towards inflation in the running of an economy. The IMF listens politely when we talk about restraining inflation but it is interested only in our payment of cash back to it. It works to a simple rationale. The background is that the IMF has not been interested in the stabilisation of exchange rates. It believes that exchange rates will look after themselves.

Mr. Nott: I am not in a position to defend the Chancellor of the Exchequer, but if one were to use the M3 target, which is a possible alternative, one would have a less effective target than DCE with massive movements across the exchanges. DCE is much the best target for the Chancellor to have chosen. The hon. Member for Motherwell and Wishaw (Dr. Bray) has not sufficiently developed his argument.

Dr. Bray: The hon. Member is right to say that the balance of payments and money supply must be considered, but other things must also be considered—investment in manufacturing industry, inflation, the level of employment, and so on.
A better approach is for the debtor country to decide its domestic fiscal and monetary policies, and to declare to the IMF those policies and the trade-offs it was making and would continue to make between a limited number of objectives in implementing those policies. In the case of Britain, where the imbalance lies not only in the balance of payments, the objectives might include the balance of payments, the public sector borrowing requirement, money supply, investment in manufacturing industry, the retail price index, GDP growth, and unemployment. In pursuing these objectives, Britain would use its full range of fiscal and monetary policy instruments, and the IMF would monitor policies to make sure we stuck to our declared priorities.

Mr. Nigel Forman: Is the hon. Member not exaggerating the power and malevolence and even the shortsightedness of the IMF? Has he taken into full account the principles in Section 3 of Article 4 of the second amendment which says:
These principles shall respect the domestic, social and political policies of members, and in applying these principles the Fund shall pay due regard to the circumstances of members."?
Does he not agree that the Fund has always paid due regard to the circumstances of its members? I do not see how he can argue that the Fund is being excessive.

Dr. Bray: I have read that section but that is a general declaration of principle. It sounds fine on the executive board, but not so fine when one is in the Treasury

negotiating with IMF staff negotiating with necessarily dirty fingers a tightly defined deal. The IMF staff may be dealing with one country which has resources and is well served with statistics such as ours, but the same methods have to be used when dealing with developing countries and with countries which cook the books—not necessarily the developing countries.
Against that situation, I entirely respect what the hon. Member for Carshalton (Mr. Forman) has said. We have to see the difficulties in which the IMF staff find themselves. I say not that they are malevolent but that they are not pressed hard enough in the development of their technicaly methods. It is this curious method that the Treasury has accepted and indeed supported its application to other countries.
The House may well ask why, if that is so, we have put up with it for so long. Obviously, the answer is that there was no political alternative. I suggest that there is now an alternative because of the new Administration in the United States.
I draw the attention of the House to an interesting article in the Economist of 18th December by Richard Cooper in which he said:
Governments will and should intervene to influence exchange rates … Private speculators cannot be expected always to smooth exchange rate movements adequately, and governments can help to form expectations if they intervene to smooth exchange rates and to brake rapid movements. The IMF rôle is to make sure that the intervention is not at the expense of other countries, or inconsistent with the action of other countries. Working out a modus operandi for exchange rate management will be the major task of the next few years in the international monetary domain.
In working out the background of that, Richard Cooper firmly sets aside the Polak model. In the American Economic Review, of May 1975 he says of the simple Keynesian and monetarist models of the Friedman, let alone the Polak type:
These models cannot ocmpete successfully with the more complicated models. Today most economists would probably agree there simply is not much empirical content in their approach.… Economists will want to know how specific components of demand are connected to money markets and the accuracy of predictions about the behaviour of the links in that chain.
It is useless for us to go to the United States and say that we are glad that the new Administration takes a different point


of view from the previous Administration and that it takes a different point of view from that handed on to us in the IMF conditons unless we are able to say that there are things that we can do about our domestic economy that would open up a different prospect.
It is no good going to the United States and calling for more favourable international arrangements unless we can show that we can develop particular aspects of industrial policy. But I shall not pursue that line as it goes outside the scope of the debate.
In the next year or so, we shall introduce three major developments into companies in this country that many hon. Members feel will be damaging, but that I think will have a constructive effect. The first is the Bullock Report on industrial democracy in which the new United States Administration is interested. It cannot understand our hang-ups with class in British industry. The German Government is also interested in it because of its own pioneering experience in the field.
The second development is the introduction of inflation accounting. The failure of British industry over many years adequately to renew its operational base will be highlighted in company reports and inevitably therefore in the internal operations of companies, in tax laws, and so on.
Thirdly, we shall be returning to freer collective bargaining, with the opportunities that that will open up for a major advance in productivity as well as the responsibility of coping adequately without excessive inflation.
How we hold those three together and develop them into a constructive industrial policy is the challenge facing us. In that New Statesman article I suggested how we might do it, but I cannot develop that theme now within the scope of the Bill. However, within the scope of the Bill, we must ask the IMF to review the basis of its operations and revoke the Polak model. We must ask it to find a wider basis than domestic credit expansion for the monitoring of the economies to which it lends money and to seek the balanced policies that I outlined. Embracing many objectives and using many instruments of government—indeed, all such

instruments—to pursue those objectives is within the scope both politically of what the Government can achieve and technically of what economics can now do. But we should not underate the technical difficulties. I shall later suggest how we may tackle them.
Let me first deal with another aspect of the Bill—the overseas development element. My hon. Friend the Financial Secretary said that the IMF could make a further contribution to commodities policy in particular. Possibilities there have been very much delayed by what the United States Administration was prepared to put up with. The Kissinger initiative at Nairobi was one of those miraculous events that sometimes occur. Somebody managed to persuade Dr. Kissinger of the importance of economics in foreign policy, and of commodities to developing countries and he took that initiative. But my right hon. Friend the Member for Lanark (Mrs. Hart) can be reassured that it will not be the basis of the new United States Administration's policies.
In the United States journal Foreign Policy for the summer of 1973, Fred Bergsten, now in the US Treasury, wrote
The United States must, in its own national self-interest, adopt much more co-operative and responsive policies toward the Third World.
That was the main conclusion of his analysis then. In the same journal in the winter of 1974 he wrote:
These considerations all point to the desirability of an international, rather than a purely national, approach to the commodity problem.
That is such a major departure of United States policy that the Government, using their influence in the EEC, should be preparing a major initiative for the economic summit.
If we ask where the UNCTAD discussions on commodities have got to, the answer is that they are rapidly running into the sand. At the meeting of intergovernmental experts on copper, the first substantive test of the viability of concept of the common fund, the intergovernmental group wound up with a list of 27 technical problems which needed to be explored before the drafting of a serious commodity agreement. The group's questions are very sensible. They may have been put forward in an obstructive


mood, but I do not think so. They include the capital requirements of new mining operations, the related cost of production, and substitution, including the relative supplies of copper and computing materials. These were all the most obvious questions.
In response, the Secretary-General of UNCTAD said in reporting on the meeting:
It is premature to draw any conclusions of a general nature from the two preparatory meetings and the one expert group meeting so far held. However, while the Secretary-General of UNCTAD fully appreciates the importance which governments attach to detailed studies and the fact that the amount of relevant preparatory work done prior to adoption of the Integrated Programme varies from commodity to commodity, he would like to stress the need to balance requests for additional studies against the need to move expeditiously towards negotiations within the time-frame set by the conference.
I have told the Secretary-General of UNCTAD that I do not see how it would be possible to reach viable agreements within the purely diplomatic negotiating framework and with the limited research resources available.
If we take the commodity problem together with all the other problems rightly identified by the experts, and the problem of exchange rate stabilisation rightly identified by Richard Cooper as the major problem facing the IMF, we see that we need to raise the technical level of international negotiations to match the enormous advances that have taken place in the design of policy. About 15 years ago the Social Science Research Council of the United States launched a project at the Brookings Institution which came to be called the Brookings Model and which led to the concept of the management of the modern national economy. The preface to the Institution's third report said:
When the original large-scale system
—of economic modeling—
was first planned and constructed, there was no assurance (or knowledge from previous research) that the separate parts would fit together in a consistent whole. There was also no experience to suggest that the tremendous quantity of information required for such a system could be handled efficiently. Both efforts were successful".
That had a major impact on the approach to economic policy in the United States, and, indirectly, in this country. But we are now at the stage where we need to

go a step further in tackling the problem of using multiple instruments to pursue multiple objectives, allowing for time lags and the uncertainty of the system. The technical problems have been solved. But the answers have not got through to Government Departments in this country.
The Government had an opportunity to take a lead in this matter when I put down an amendment to the Industry Bill during its passage through the House in 1975, requiring the Treasury to undertake policy optimisation work. I traded in that amendment, which was passed in Committee, for a commitment by the Government to set up a committee of experts to advise them. I urged Ministers to appoint an international committee, firstly, because for sufficient experts on the matter one must go outside this country, mainly to the United States, but also to Sweden and France. The second reason was that the most important aspects of the application of policy optimisation would be in the international arena, not least in the international monetary world in dealing with the problems of monetary stabilisation, and in commodities.
Ministers could not face the prospect of saying that we in Britain seemed to need help from abroad, and they set up a purely British committee, which is at work under the chairmanship of Professor James Ball, of the London Business School. I wish it every success, but it will be handicapped by having to undertake a two-stage selling operation first within the United Kingdom and then internationally.
Because of the limitations of our imagination and technical competence in Britain in the management of these questions, and because of the far higher technical competence in the new United States Administration compared with the old, I suggest that we ask the United States to establish a comparable exercise to that of the Brookings Model 15 years ago, but applied to the concept of policy optimisation and its international development. The Brookings Institution would obviously be an admirable place to locate such a study, but I do not think that the United States would be bound to that. I know that many international bodies are interested. One is the Ford Foundation, which is organising a conference on


commodities in Washington in April, when I hope to be present, and I hope the Government will send representatives.
The first major initiative should come with the economic summit, when the first meetings will take place on the new developments in economic policy. I plead with the Government to recognise the technical level of the argument which needs to be put to the new United States Administration. The Government have come nowhere near that level in their presentations to the House or in their arguments with the IMF. The country is paying a tremendously heavy price for that neglect. I hope that that omission will be repaired in the next few months.

6.10 p.m.

Mr. Peter Viggers: I congratulate the hon. Member for Motherwell and Wishaw (Dr. Bray) on his authoritative speech. I invite him and the House to reflect upon how much more authoritative it would have seemed if he had not been a member of the Government who have reduced our country to the state that it needs to apply to the International Monetary Fund for loans, when it needs to accept IMF terms by way of dictation and when it needs to prostrate itself to whatever dictation comes from the IMF. It is sad that we find ourselves in that position. Perhaps, if we can strengthen ourselves, the suggestions that the hon. Member has put forward will be accepted with even more alacrity by the IMF and those who are authoritative on these subjects.
The Benches below the Gangway on the Government side of the House are thinly populated today. The right hon. Member for Battersea, North (Mr. Jay) does not fully represent those who would normally be found there. It is right that those of us who accept the need for international trade and reference to the IMF should recognise, in the absence of those who put forward these arguments from time to time, that it is not possible to have an alternative strategy to that which we are now adopting of an IMF loan.
An alternative strategy would not work outside a siege economy. A flat statement that a trading nation needs to trade with its partners in the free world is necessary and should be on the record.

The proper approach for this Government should be the Gaullist approach. We should work with Europe while the institutions there continue. We should express our support of international institutions and keep a prudent eye on our own position, because it is by being strong in trade and finance that we can help others.
The gap between the rich and poor nations seems to be widening. The gap between the rich and poor in the poorer nations also seems to be widening. It is increasing to the extent that more than 500 million people will go hungry today and about one-third of the children born in Africa and Asia today will die before reaching adulthood. That is an appalling state of affairs. We can best help ourselves by proper housekeeping, by prudence and frugality, increasing our self-reliance and financial stability and earning a surplus in conditions of increasing trade so that we may carry others with us to increased prosperity.
I back completely the remarks made by my hon. Friend the Member for Hertfordshire, South (Mr. Parkinson) when he said that the sad thing about the debate was that we should be standing as applicants to the International Monetary Fund rather than being able to debate in a more mature and positive way the manner in which the Fund might be altered. As supplicants we do not carry the same authority.
If we are not the sick man of Europe, at least our people have been treated by the Government as spoilt children. Encouraging the demands of people, encouraging them to make demands which have proved to be impossible, has been damaging. It is like encouraging spoilt children to eat chocolate. The Chancellor has now taken us to the IMF in much the same way as a child is taken to the dentist. The alternative to going to the dentist would have been to be taken to the cleaners.
It is right that we should pay tribute to the achievement of the Bretton Woods Agreement, which created the IMF and the World Bank. It is remarkable how successful these institutions have been. It is unrealistic of us to oppose what is effectively a ratification of the revisions to the IMF, although detailed points most certainly require attention in Committee.
It always seems that in a detailed Bill like this the parliamentary system stands revealed in all its nakedness as being most defective. We are debating the Second Reading of a Bill containing a large number of detailed points. In Committee there will be the opportunity to cross-examine Ministers on some of those points and, hopefully, to receive answers. It will only be towards the end of the Committee stage that hon. Members on both sides of the Committee will realise the implications of some of the points which appear in the Bill.
How much better it would be if, when a Bill first appears before Parliament, it came by way of a First Reading which could be taken in a Committee Room, where Ministers, draftsmen and the civil servants responsible for the Bill's preparation could be brought into the discussion and cross-examined. Alternatively—and this is the system I would prefer—once the Bill had appeared it could go before a Select Committee, when Ministers, draftsmen and civil servants would be invited to give their explanations of the various matters in the Bill. Opposition criticism is often based not so much on ignorance as on an inability to comprehend what is intended because Opposition Members have not been able to look into the minds of the parliamentary draftsmen. I feel strongly that the present system, which allows a Bill to receive a Second Reading and then go into Committee—where it is debated in ignorance by hon. Members—is defective and needs amending.

Mr. Deputy Speaker: Order. The hon. Member would be very much out of order if he were to begin dealing with the procedures of the House. I hope that other hon. Members who follow him will not pursue that line, because I should have to rule them out of order.

Mr. Viggers: I am grateful for your guidance, Mr. Deputy Speaker. It is difficult to deal with a detailed Bill like this without occasionally raising points on the way in which it is dealt with in the House.
The Government are now proposing that we should align ourselves with the new terms of the IMF, and they are doing so in a situation in which they have raised £7,250 million of gilt-edged stock since mid-September, all at about

a 15 per cent. yield. Perhaps the Minister can comment on that. It seems remarkable that the Government should have found it necessary to raise so much gilt-edged stock at high interest rates and then allowed interest rates to diminish. I suspect that the answer is that it was a "Catch 22" situation and that the Government would not have been able to raise the funds unless the interest rates had been high.
On the export credits guarantee part of the Bill, I feel that I should acquit the Government of a charge I sought to lay in Committee during proceedings on the 1975 Bill dealing with export credits. I suspected then that the Government and the Minister were seeking to cover the difference between loans and guarantees made in the commercial interest to people in this country and loans and guarantees made in the national interest. It will be recalled that the 1975 amendment Act made it no longer necessary for separate limits to be adhered to in respect of loans or guarantees made for commercial reasons and loans and guarantees made in the national interest. These were amalgamated in the one limit of —12,200 million, which is now being increased to —25,000 million.
I remain apprehensive of loans and guarantees made in the national interest. It is so easy to talk of something as being in the national interest without realising that the national interest is intensely subjective. Different Ministers will have different ideas of what is in the national interest. I suspect that the right hon. Member for Lanark (Mrs. Hart) would have different ideas from me about what is in the national interest. I still feel it wrong to have one amalgamated limit for loans and guarantees made under both those headings. I feel that it is necessary either to have a better explanation from the Government or to have separate limits for these two categories.
The other point upon which I remain apprehensive is the new SDR limit. When the Chancellor referred on 15th December to the new proposal to finance export loans and guarantees by funding these overseas, he said:
We believe that by funding medium and long-term export credit in foregin currency instead of in sterling we can reduce the burden


which export credit imposes on public expenditure, the PSBR and the balance of payments."—[Official Report, 15th December 1976; Vol. 922, c. 1530.]
This can be so only if it is expected that the interest and inflation rates in this country will be worse than the inflation and interest rates overseas. The logic that follows that statement must mean that the Chancellor thinks it better to borrow overseas because the United Kingdom currency will depreciate. This needs clarification, if not tonight by the Minister, at least in Committee.
It is an extremely important subject, particularly because the foreign guarantees will be in respect of buyer credits. One expects the buyer credits to be financed by foreign banks, which means a loss of business to British banks. Why should British banks lose business if it is worth having? If it is not worth having, one does not care, but presumably it is worth having and, therefore, some potentially valuable business is being lost to the United Kingdom sector. That aspect needs clarification.
I am surprised that the limit for special drawing rights on foreign borrowing should be so high, as it is essentially at this stage a pilot scheme. One is hesitant to see such a large scheme brought in at this stage.
My hon. Friend the Member for Hertfordshire, South referred to export credits to Soviet bloc countries. I was reminded of a comment by Mr. Bukovsky when he visited this country earlier this month. He said that he was in a labour camp working on timber and wood products. These products went from Russia to Iran. He found that Iran was financing the United Kingdom and that the United Kingdom was giving advantageous trade loans to Russia, the country which was keeping him in a labour camp. He felt that it was a small world and how closely related its peoples were. That feeling was reinforced when Mr. Bukovsky found that the handcuffs on his wrists on the way back from the camp were American.
By giving the Russians the money for export credits which enable them to buy from us, we not only finance them and give them capital in the long term but we give them prestige in showing that they are dealing with us and

that we are prepared to deal with them. This is an important matter which should be probed. I remain apprehensive that the Government should have chosen the Soviet bloc, Russia in particular, as the subject of a major trade initiative which gives such benefit to those with whom we are trading.
I feel that the Commonwealth Development Corporation—not a subject on which I claim special knowledge—is a good example of Francis Bacon's saying,
Money is like muck, not good except it be spread.
It is necessary that countries in the Third World should have the opportunity of benefiting from trade with us, and to do that they need money. Is the Minister able to say whether progress has been or can be made on allowing loans and credits through the IMF to Third World countries? This could be done by an extra quota of special drawing rights going to them, thus giving them the benefit of soft loans.
I feel strongly that it is wrong of the Government to bring forward three Bills under the guise of one. The three subjects dealt with in this Bill are utterly disparate and should be treated in separate Bills. There is no direct connection between a revision of the terms of the IMF, a change and increase in the terms of credit guarantees, and an increase of the funds available to the Commonwealth Development Corporation. This is not a narrow political point which should divide the House. On the contrary I think that anyone, on whichever side of the House he sits, who has the interest of Parliament at heart should surely accept it.

Dr. Bray: The hon. Gentleman is inviting us to support him in this argument. But there is a strong argument for taking these three international problems together. Their interconnectedness is highlighted, as we shall find in Committee.

Mr. Viggers: I do not feel that to have the three subjects in one Bill is any more justifiable than to have had the aircraft and shipbuilding industries lumped together in one measure. I feel strongly on this point and I shall continue to urge it. I reserve the right to make a gesture on the Money Resolution in order to underline the point.

6.25 p.m.

Mr. Bruce Douglas-Mann: I disagree with the hon. Member for Gosport (Mr. Viggers) about the interconnectedness of these measures. I hope that I shall not strain your patience, Mr. Deputy Speaker, by trying to demonstrate my concern about certain clauses of the Bill, particularly the inadequacies of Clauses 5, 6 and 7, in relating them to the conduct of the economy as a whole.
I, too, welcome the Bill, although I share some of the misgivings expressed by the hon. Member for Hertfordshire, South (Mr. Parkinson) about the extent to which we in Britain are drawing on the IMF. I accept that in present circumstances we have no alternative, but I am concerned that we should have put ourselves into an economic situation in which we had to draw on the IMF and are doing so at the expense of the availability of such credits to the developing countries.
I do not agree with my hon. Friend the Member for Motherwell and Wishaw (Dr. Bray) in another respect. I do not believe that we can seek or should be seeking to sustain our economy by dependence on growth in the economy. I believe that by pursuing the policies we have been pursuing we have been sustaining a living standard which we are not financing by our own production. I do not think it right to try to borrow until our growth catches up on us or to expand our consumptive capacity, because I do not believe that it is possible indefinitely to sustain a level of production and consumption on the scale envisaged as it requires continued growth in consumption in order to finance the production. I believe that we should be looking much more fundamentally than we have done at the basic structure of our economy and at the question of whether we should aim at a stable rather than a growth, economy.
The principal issues which I wish to raise have been the subject of two very important Government reports, neither of which has been debated. The first was the paper "Sinews for Survival", prepared by the Department of the Environment on the instructions of the then Secretary of State in 1972 for the Stockholm Conference on the Human Environment. It said:

Many of the natural resources of the world, and particularly those that are peacefully available to Britain, are finite. Even with a static population they may well be insufficient to provide the raw material for the rate or the kind of economic growth and increased affluence which is almost universally assumed to be desirable for the next 100 years. If populations continue to grow as forecast, some resources are probably insufficient for the next 50 years; that is within the lifetime of most young people.
It concluded:
We have been driven by the evidence we have assembled to the conclusion that to devote our resources to the achievement of the highest possible growth rate, as conventionally measured, is no longer desirable.
The message of that passage was strongly reinforced by a paper prepared by the Cabinet Office and published last March. That paper attracted almost no notice in the media and in this House. I saw a tiny paragraph about it on, I think, page 3 of The Times. I was able to obtain a copy of the paper only with some difficulty from the Library, which had not until then even heard of it. It is an extremely important document also. It contains the report of a committee set up by the Cabinet Office to consider future world trends in population, food, mineral resources, energy policy, and economic aspects, and it sought to draw conclusions and implications for the United Kingdom.
It is relevant to the Bill if I briefly draw attention to one or two passages in the document, because it considers the problems and prospects of world population. Paragraph 5 on page 21 of the conclusions states:
On current demographic assumptions, and assuming that the world can be fed adequately, the population of the developing countries is likely to be 4½ to 6 billion by the turn of the century",
to which we must add about 1 billion or 1¼ billion in the developed countries, making within 23 years a world population of between 6 billion and 7 billion people. There is considerable discussion in the document about the accuracy of those assumptions and the basis on which they are arrived at. It is a median assumption. Even the most optimistic assumptions are not very much smaller.
The document also considers how that expansion in world population—and the effect it could have on our own economy as well as on the economies of the entire


world—might be contained. Birth control is one obvious answer, but paragraph 57 states:
Experience suggests, however, that fertility regulation programmes become effective only when the expectation of life has risen significantly and living standards have started to rise. Thus, aid is needed first to relieve poverty and raise living standards and to help create a social framework which is conducive to the practice of fertility regulation.
It is not enough to advocate a birth control programme. It is absolutely vital that we raise living standards so that people can see that there is a prospect of a better standard of living if they contain their families. It is essential for them to know that if they plan to have only two or three children the probability is that those children will survive, and that it is not necessary to have 10 or 12 children in the hope that a few will survive to give support in one's old age.
If we are to have the disastrous expansion that is envisaged in the document, and which is already taking place, the only prospect of our containing it is to raise world living standards. That depends on our expanding world food production capacity.
Paragraphs 16 and 20 of the Cabinet Office paper make quite clear that world food production could be expanded enormously. A vast amount of fertile agricultural land in the world is capable of producing food. At present, only one-half of the potential agricultural land in the world is cultivated and only one-quarter of the total is irrigated. With present technologies and resources, it is possible to expand world food production and capacity to a level that would be sufficient not merely to maintain existing living standards but to expand and improve them.
The document concludes, in paragraph 59:
Although it should be theoretically possible to feed the world's growing population until the turn of the century, the undoubtedly severe problems of providing the capital investment needed both to increase food production to the necessary level and to distribute it have not yet been fully examined. There are also enormous political, social and economic problems involved in increasing food production to these levels. It is probable that market forces would work against the equitable distribution of food due to present income distribution.

I take the point made by the hon. Member for Gosport that we should not only ensure that the living standards of the poorest countries in the world rise in comparison with those of the developed countries but, equally, that we should encourage a more equitable distribution of wealth within those countries. That, however, is not within our control. Where we can assist and contribute is through the nature and scale of the aid that we ourselves supply.
The paper goes on to say:
The resource costs, particularly that of the energy needed to produce the necessary fertilisers and for transport, will be so large that without accelerated economic development the danger is that a major proportion of the world population will not have sufficient real income to buy food at prices which cover the costs of production. To combat this, massive transfers of resources will be necessary and particularly for the poorest group of countries (those with GNP per capita below $200), which includes some of the most populous countries, these transfers will need to be made on very concessional terms. The United Kingdom has recently decided that its future Government to Government aid to such countries will normally be in the form of grants. But the present evidence is that concessional capital flow as a proportion of the GNP of the developed countries as a whole is falling rather than rising.
It adds:
Much more still needs to be done, however, and without concerted help from those countries that can provide the resources, the world's population is unlikely to be adequately fed whatever the theoretical possibilities for increasing food production may be.
An alarming final paragraph points out that
Unless there are resource transfers on a scale many times greater than at present, the effective check to world population will be the Malthusian trilogy of war, famine and disease. This is an urgent problem, but at present aid and other capital flows are falling as a percentage of GNP of the developed world as a whole and it is by no means clear that those donor countries who can afford to do so would be prepared to provide aid on the terms and scale needed. As lower birth rates seem to result from increasing standards of living, failure to raise real incomes will militate against the success of population control measures and further exacerbate the longer term situation.
I believe that it is possible for us to change this pattern and to change it within our own society. There is strong pressure from our constituents to sustain their living standards and not to worry about the problems of the rest of the world. We must get across to people that


what we are talking about is not the dishing out of aid to underdeveloped countries. It is not a question of generosity or morals. It is a matter of our survival.
At the rate at which the world population is expanding, the developed countries of the world—which at present represent about 20 per cent. of the world population—will be down to about 10 per cent. of world population by the turn of the century. In that situation the prospects of our sustaining anything like the standard of living that we have at present, and of being able to trade on the sort of advantageous terms that we had, for example, prior to OPEC, will be very slim indeed. The prospects of our being able to avoid war or other conflict in that situation are very remote. Therefore, aid is not merely a question of morality or generosity. It is a question of survival for ourselves.
We can achieve a scale of aid far greater than we have been achieving. I was sorry that the Chancellor decided as he announced in December, to cut our aid programme by £50 million. The projections in the Public Expenditure White Paper look encouraging, but I am afraid that the achievements are still very much in the future. The actual spending on overseas aid in the period since the Labour Government came to office has been less in real terms than it was in the preceding year. Although it is projected that overseas aid in 1976–77 will be over the £1,000 million mark—rising to £1,252 million in 1977–78 and £1,380 million in 1978–79—it is still only a trifling contribution towards the level of expenditure that we ought to be making if we are taking a realistic look at the prospects that face the world.
Even without drastic changes in our living standards or ways of life, I believe that we can sustain stability. We can do it by seeking to limit our level of consumption, rather than constantly seeking to increase the level of consumption in order to sustain the level of production.
The way that our economy is organised, we have to have a steady growth in the level of consumption if we are to sustain full employment. I do not believe that that is necessary. The first and most essential means of achieving the objectives which I believe are vital to the survival of our children, and possibly of

ourselves, is to put our own economy on its feet. I agree with Opposition Members in this respect. However, we must do it by curtailing our consumption, by sustaining the level of public services and by increasing the level of overseas aid.
I support the Bill, but I should have preferred to see it on a very much larger scale than it is.

6.40 p.m.

Sir George Sinclair: I support those of my right hon. and hon. Friends who have already given a welcome to the Bill. I want especially to congratulate my hon. Friend the Member for Hertfordshire, South (Mr. Parkinson) on the effective and engaging way in which he tackled this debate in his debut at the Dispatch Box.
While I share some of the general disquiet expressed by my right hon. Friend the Member for Chipping Barnet (Mr. Maudling) and my hon. Friend the Member for Gosport (Mr. Viggers) about the extent of credit now being offered to the Soviet Union, I welcome the statement by the Financial Secretary that the Bill is in general in support of an expansion of world trade for the good of all.
As a great trading nation we have a common interest with our trading partners all over the world in an expansion of world trade, but we have a very special interest in common with the Commonwealth and much of the developing world in the opportunities which we have there for increasing trade and for developing the political associations which stem from long ago and are maintained today. It is much in the centre of the thinking of the developing countries, as I believe it should be in ours, that the best sort of relationship between a developing and a developed country is one based on buoyant trade in which each has something to offer and something to receive. It is a far better relationship than one based on aid, however well intentioned that may be. I welcome the Bill because of the major impact that it aims to make on the expansion of our world trade.
The Bill's coverage of our relationship with the IMF has been discussed by other hon. Members. For my part, I shall concentrate on the Export Credits Guarantee Department and on the Commonwealth Development Corporation because they operate in spheres in which,


over the years, I have had some personal experience.
The ECGD is rightly the envy of a great number of the industrialised trading nations. It has shown sensitivity in dealing with our trading risks in countries with swiftly changing economies. It has been of special assistance to those who often needed it most—not the greatest trading groups, but the middle-sized and smaller groups which could not afford to take some of the risks which the larger and wider-based companies preferred to absorb themselves. It has been a model of callaboration and confidence between the Treasury and the City. The marriage between the two has proved to be remarkably successful; and it has lasted for 60 years. This is a matter for rejoicing on both sides of this House. I am delighted that under the provisions of the Bill the ECGD is to be given greater scope. If we are to expand our trade with both industrialised countries and developing countries, many of our trading groups will need its guarantee as a net underneath them.
The Financial Secretary spoke of the rapid growth in the world-wide exchange of commodities which had taken place since 1945. One of the most important requirements of the developing countries is to have assured markets at reasonable prices for their exports, especially their natural products. One of the great limitations on their capacity to manage their own economies has always been the wild fluctuations in the market return for their commodities. I grew up in work in the Gold Coast—a country which suffered wild fluctuations in the price of cocoa, and I saw the dislocation which that could cause in all Government planning. Much the same happens with many other countries which are greatly dependent on the export of a single commodity.
For years Great Britain has led the attempt to establish international commodity agreements. They have been slow in emerging. The difficulty arises partly from fluctuating prices themselves. Often when an agreement was about to be reached, one of the main countries would say, at the last moment "The price is going up beyond any level that we shall get under a stabilised price agreement. Let us run the risk and go it alone." As a result, the commodity

agreement failed to come into being. But, gradually, more countries are coming to accept the need for such agreements, and Great Britain has been the spearhead. It is in London that a number of the inter-Government commodity councils have their headquarters today. They are five—those concerned with rubber, coffee, sugar, tin and wheat, and there are four other international groupings in operation which are centred on London.
In support of all our efforts through ECGD in our trade with the developing countries, this Government could not, at this time make a more effective individual contribution than by helping to establish and develop an international commodity council centre in London. They have proposals before them at the moment from the interests concerned to set up such a centre in London. They have been presented with a good case, which has already some appeal to Members on both sides of the House. Such a centre would reinforce success, and develop further a valuable function which this country, and London in particular, is exercising on behalf of the whole trading world.
To turn now to the Commonwealth Development Corporation. I have seen it in action in a number of parts of Africa. I think that it is unique in its sensitivity as an instrument for the transfer of resources. It has a remarkable record of investment, allied with management. In spite of the fact that it operates in many of the most difficult and fast-changing economic areas of the world, it has had, except in its earliest years, a remarkable record of helping those countries and of passing on training to their people. It also has a record of turning a profit in the end and enabling itself to expand. I am delighted that the Bill is offering it an expanded range of operation.
The CDC has some special features. As I have said, it operates in difficult areas of developing countries with new and rapidly changing problems, political ideas and leadership, and does so with maximum acceptance. It has established for itself a reputation for detached professionalism and political sensitivity. It is remarkable that at a time when nationalist onslaughts are being made on any economic input from overseas—onslaughts of neo-colonialism—the CDC has been almost immune from any attack on


these grounds. It has been operating with a remarkable range of local participation in association with Governments, local and overseas private enterprise, local co-operative movements and community groups. There is no pattern which is natural to that area which the CDC has not been willing to attempt to develop and make into a viable economic enterprise. It has often made important capital investments in areas where free enterprise risk capital would not go.
One of the things which have led to the maximum acceptance of the CDC's operations is its purposeful training of local staff at every level. All over the world it has been regarded as a model for the developed countries to adopt when assisting the developing countries. This has led to praise for the CDC from the IMF. The CDC has helped Britain greatly with investment and trade, and what is more it has for many years been able to carry out its services and make a modest profit. Last year it made a profit of about £40 million. Considering the conditions in which it operates, and the risks it has taken in new forms of organisation, this is a remarkable achievement, and we are right to reinforce its success.
There are other important ancillary supports for all our efforts in this field. I have mentioned the commodity councils in Britain which have been a great help to the ECGD and to trade generally, but the amount of good will which the CDC and the ECGD have in the developing countries is greatly increased by the work of the voluntary agencies, such as the Intermediate Technology Group and Christian Aid. I declare an interest, as I sit on the boards of both. In the work they do, and the people they send out, they are operating as the CDC is increasingly operating, at the grass roots in rural areas of the poorest of the poor countries. This does great credit to this country, and it is a credit which spreads not just to Parliament but to people all over the country at the grass roots—by Christian Aid in the Churches and by organisations such as Oxfam. Many more people are beginning to share in the awareness of the need, and the common interest which we have in the progress of the developing countries. I hope that the Government, in considering the overall pattern of overseas trade, will continue to give support to the voluntary

agencies, which do so much to increase the good will on which so much of our success has turned and will turn in the future.
I welcome the Bill, and I hope that in Committee we shall be able to modify some of its excesses and reinforce some of the most promising lines on development.

6.58 p.m.

Mr. Frank Hooley: The main purpose of the Bill is to honour the commitments which the Government entered into in negotiations through the IMF. I welcome those commitments, and I welcome the general provisions of the Bill.
A few months ago a debate on the IMF would have been regarded as rather esoteric, but the IMF is now something of a household word because of the recent controversy. One might even say that the IMF is a household dirty word. I do not share that view. I regard the IMF as an enormously important instrument of international co-operation.
It is not a bad thing to remind ourselves of the purposes of the Fund. I quote from the IMF's annual report of 1976:
The essential purpose of the international monetary system is to provide a framework that both facilitates the exchange of goods, capital and services among countries, and sustains sound economic growth.
I hope that the Treasury takes that to heart. I get the impression that it is concerned with combating inflation and fiddling with public sector borrowing requirements and, as a result, is overlooking the main purpose of loans from the Fund. That purpose to facilitate economic growth in this country and elsewhere.
In the original Bretton Woods discussion, Lord Keynes was very keen to create an international currency. He even had a name for it; he called it Bancor. We had to wait until 1968 for an international currency to become available—the famous special drawing rights. I wish that we could find a pleasanter name for it. The first SDRs were created in 1968. They represented an important breakthrough in international monetary arrangements. The provisions that we are now discussing, to ratify what my right hon. Friend the Financial Secretary


described as only the second amendment to the articles of the IMF, represent an even more drastic and far-reaching reform of the international monetary system.

Dr. Bray: Before my hon. Friend leaves the point about the name of the SDRs, he will see that in a recent IMF staff paper one of the chief legal advisers suggests the name "talent". The question arises whether a country should bury its talents, as some do, or use them, as we seem to be doing.

Mr. Hooley: That is a jolly suggestion. I hope that someone will follow it up, provided it is not suggested that this country should have only five talents and not 10 or 100 or whatever we need. Whatever the name, the concept is enormously important and has now been carried forward to make the SDR the international reserve unit. The function of gold as the unit of value has been eliminated and its rôle as common denominator of the par value of currencies has been ended. This is an important step forward in the management of international monetary matters.
The SDRs, the quotas of the IMF, as provided in the Bill, will be expanded from 29 billion to 39 billion. It is also interesting that the balance of the quotas will shift slightly to take account of the rising importance of the oil-producing countries. In future the oil countries will have about 10 per cent. of the total quotas, the industrial and wealthier developing countries will have about 69 per cent., and the remaining developing countries will have about 21 per cent. of the total. This represents not a large but a significant shift in the recognition of the importance of the oil countries in future monetary arrangements.
The agreement provides for the Fund to dispose of one-third of its gold holdings, about 50 million oz. I am glad to say that half of the money thus raised will go to create a fund for helping developing countries. The other half of the money will go back to the member countries in the proportion of their quotas.
The new agreement has something to say about fixed or floating exchange rates, and my right hon. Friend the

Financial Secretary spoke briefly on this in his opening remarks. It is not a matter in which I wish to become involved, except to say that there seems to be some disenchantment with the regime of floating rates and some suggestion that perhaps we ought to move, if not right back to the Bretton Woods concept of fixed exchange rates, at least half-way back to some sort of managed arrangement and not the rather erratic arrangements which seem now to prevail. That, however, is a matter for a separate debate.
My main concern over the IMF is the value of the Fund as an instrument of aid to developing countries. It was not conceived as an aid instrument, and for many years, and still to some extent, its workings have been dominated by the rich industrial countries, perhaps without sufficient concern for the poorer countries.
In four important respects, however, the IMF has become an instrument for providing aid to the poorer countries. The first, which was mentioned by my right hon. Friend the Financial Secretary, was the oil facility under which 5 billion SDRs were made available as a fund to help the poorer countries which ran into extreme balance of payments difficulties because of the fivefold rise in the cost of oil in 1973–74. Forty-six members made use of this facility, drawing a total of 4·4 billion SDRs in 80 separate transactions. They included such countries as India, which drew 401 million, and Pakistan, which drew 236 million.
The facility was not confined exclusively to developing countries because Italy and the United Kingdom also borrowed from the Fund, but it had an important value for the poorest countries. Between September 1974 and May 1976, 55 countries took advantage of this oil facility to borrow the equivalent of 7 billion SDRs. The providers of the Fund were largely the oil-exporting countries—Iran, Kuwait, Nigeria, Saudi Arabia and Venezuela—although Germany and the Netherlands contributed to it. It constituted an important part of the recycling process which helped the countries which had suffered as a consequence of the petrodollar surplus.
There was a 7 per cent. charge on those loans from the oil facility, but a special subsidy account was created to ease the


burden on the poorest countries that wanted to use it. This technique is important. I hope that if the world runs into further difficulties with a petrodollar surplus—as it may do—the IMF will be used as the instrument for recycling, instead of hot money floating in and out of London and causing enormous problems for our economy, as it has done over the past couple of years. The surplus petro-dollars could be channelled through the IMF to countries which, for balance of payments reasons, need temporary help of this kind. I believe that it is important that we should support international instruments of this kind rather than rely on the now outdated idea that London somehow is the centre of financial dealings.
The second important part of the work of the IMF which has a bearing on its development is the Compensatory Financing Facility. I gather that it was created back in 1963 but that it did not play a very important rôle in international monetary affairs until the oil price explosion and the general inflationary explosion which have taken place over the last three years.
Basically, this is a method of helping particularly the primary producing countries if their export prices fall or if the market collapses and they find themselves in serious balance of payments difficulties on account of wild fluctuations in the price of primary products. They are able through the compensatory financing facility offered by the IMF to draw between 25 per cent. and 50 per cent. of their quota to help themselves out of their difficulties.
There are technical calculations as to how countries qualify for that aid. Basically, what it amounts to is relating their earnings from primary produce to their average export earnings over five years. A record 825 million SDRs was used for this purpose in 1975–76.
The EEC has tried to set up a similar technique in the Stabex system of the Lomé Convention. I would very much prefer this country to support the IMF arrangements which take in a vastly wider range of countries than does the Stabex system, which operates on a simpler and more straightforward basis. The crucial point is that the IMF can dispose of resources which Western Europe, rich though it is in many re-

spects, cannot dispose of. I very much hope that in formulating their policy the Government will pay more attention to the Compensatory Financing Facility of the IMF than to the Stabex arrangement under the Lomé Convention.
The IMF has set up what has been called a trust fund to assist developing countries with special balance of payments difficulties, the money deriving from the profit on the sale of gold. The possibility also exists of the making of voluntary contributions to the trust fund by means of grants or loans from different countries. There are 61 member countries of the United Nations which are eligible for help from the fund. A special feature is that assistance from the fund will be made available at a low interest rate—about ½ per cent.—and the repayments on loans will not begin until five years after the initial loan has been made. Payments can then he spread over 10 years. This should be an extremely useful policy for helping the poorest countries with balance of payments difficulties.
The IMF also provides training and technical assistance facilities in fiscal, monetary, banking and other matters, as well as advice and help on public finance and statistics. I would not be so unkind as to suggest that we ought to take advantage of the advice offered, but this possibility may occur to some hon. Members. During the last financial year 134 experts were sent to 45 countries, and training was provided for nearly 300 officials from 103 countries. During training, special emphasis is laid on the problems of developing countries.
The IMF makes a significant and important contribution to the developing world. One of the points in the Government document that I find curious is that the review of quotas which has recently taken place must be done all over again in 1978, just one year from now. It is not clear from the agreed revision of the articles or from the Government documents why it must all be done again in such a comparatively short time. I am not against it or against further expansion of special drawing rights—it would be a good thing and would have useful consequences for the world monetary system—but I am curious to know why the review will take place so quickly.
I hope that when the next review takes place more emphasis will be placed upon the needs of the poorer countries of the world and that in the allowances of liquidity quotas the needs of poorer countries will not be pushed to one side, as has been the case in the past. In 1978 there will be a splendid opportunity to increase the purchasing power of the developing world at no cost to ourselves.
I do not particularly wish to touch on the export credit guarantee aspect of the Bill, but I wonder whether the Government would like to take this opportunity to comment on the cost escalation scheme which was introduced a couple of years ago for the benefit of our heavy plant manufacturing industry and which has been criticised as being inadequate. The matter involves considerable technicalities since we are proposing that the finances available through the Export Credits Guarantee Department should be extended. This is a reasonable opportunity to inquire whether the scheme meets the needs of the companies that it was designed to help. I hope that the Minister will say something about this.
Another aspect concerning commercial guarantee is whether it should be used as an instrument to persuade British companies, when investing or undertaking commercial enterprises in the developing world, to observe certain basic standards in industrial relations and in their behaviour towards the local people. That could clearly be a controversial matter, and it might be more appropriate for discussion in Committee than during Second Reading. If, however, we are making backing available to private commercial enterprises, we as a parliament and the Government have a responsibility to ensure that when those enterprises operate in the poorest parts of the world, such as Africa or Latin America, they behave in a reasonable and fair manner.
The Commonwealth Development Corporation has been a remarkably successful public corporation and an indication of what can be done through a public corporation to help the developing world. The variety of its activities and their geographical dispersal is staggering. I recently read the Corporation's 1975 report and discovered that it was involved in brewing Guinness in Indonesia, steel

rolling in Fiji, vegetable growing for export in Tanzania and cattle ranching in Botswana, not to mention hotels, harbours, sugar, tourism property development, citrus growing, mortgage finance, timber, farming, palm oil, rubber, cocoa, cement, spinning mills, tea, tanning, crop seeds, vegetables for export, tobacco, rice, wood pulp, iron ore, polyester fibres, and public water supply, and one or two other things as well.
Since the Corporation must be one of the most complicated conglomerates in the world, it is remarkable that it has such a good track record in financial matters. Its latest report shows that in 1975 it not only paid f11¾ million in interest charges back to the Treasury as well as £7 million in tax but also had a slight surplus.
Another part of the Corporation's report is even more intriguing. I quote from page 10, section 5, which refers to the joint working party of the Ministry of Overseas Development:
The principal outcome of the Working Party recommendations was agreement that CDC would aim to place its new commitments during the five years 1975 to 1979 preponderantly into the poorer countries and into renewable natural resources projects, that is to say, agriculture, ranching, forestry and fisheries, including associated primary processing plants; the category of 'poorer countries' will be subject to such flexibility as the more urgent needs of marginal countries may dictate. It will be some considerable time before this adjustment of policies and priorities will show in practical results; natural resources projects have to be investigated at length and prepared in detail and, when launched, have to pass through varying periods of immaturity before the stage of exploitation or harvesting is reached and any financial return realised. For these reasons there is to be a mid-term review of progress towards the achievement of the new aims in the summer of 1977 and a further review at the end of 1979.
I am not opposed to this new policy since the CDC has been involved in this kind of thing for a long time, but it might have an impact on the profitability and commercial viability of the Corporation.
I wonder what sort of tolerance the Treasury will extend to the CDC if it is to be involved in such long-term projects as timber and forestry. These are products in which one might have to wait 10 to 20 years for a yield. If more is to be done for agriculture and in the production of rice, palm oil or other agricultural projects generally, will a more tolerant allowance be made for such


events as storms, hurricanes, droughts and failures of monsoon, which greatly affect agricultural production. I am also interested to know whether, in view of the explicit desire to help the poorest countries, there will be any moderation in the terms of interest or other terms according to which capital is made available to the CDC.
This is an extremely attractive and worthwhile Bill. It does not seem to have aroused a great deal of controversy in the House. I hoped that we might take this opportunity to have a wider debate on aid, but no doubt we can expand on these points in Committee. I wish the Bill a speedy and successful passage.

7.20 p.m.

Mr. Ian Stewart: I start by adding my congratulations to my hon. Friend the Member for Hertfordshire, South (Mr. Parkinson), who, in his first appearance at the Dispatch Box with these responsibilities, achieved the notable feat of making a relevant, thorough and interesting speech, which is not easy on such a Bill.
As my hon. Friend the Member for Gosport (Mr. Viggers) said, this is three Bills in one and I have some sympathy with the Financial Secretary who tried adequately to cover all the topics in his introduction. I hope that he will accept my comments in that spirit.
It is not easy for hon. Members, faced with such a Bill at pretty short notice, to work out what it means. Even when armed with a battery of other Acts, Government publications on the IMF proposals and so on, it is not easy to discover the exact effects of the Bill.
I have to make some critical comments about the way the Bill has been presented, but I hope that they will be regarded as constructive. The latest sterling limit set out in legislation is £12,200 million, but increases of —3,000 million have been made on more than one occasion and the Financial Secretary told us that the limit is now £18,200 million. It is misleading for the Explanatory and Financial Memorandum Bill to talk of an increase from £12,200 million to —25,000 million because that gives the impression that the limit is being doubled when, in fact, it is not.
The memorandum says on foreign currency facilities that the limit may be

exceeded where such excess is due solely to the calculations made at the end of any quarter. No excess can be due to such calculations; it may be thrown up when the calculations are made, but in ordinary language the excess arises from changes in the value of currencies. It would have been more helpful and comprehensible if the provision had been explained in that way.
It is difficult to work out when the new currency facilities come into existence. Clause 4 refers to arrangements which may be made in the period beginning 1st January 1977 and between that date and the enactment of the Bill. It would be helpful if we could have an authoritative statement from the Government about the position in the intervening period when the arrangements are not legislated for but when they may, apparently, be put into effect. My confusion on this matter may be due to my own ignorance, but the issue is not easy to follow from the wording of the Bill or the explanations offered so far.
It would also be helpful to have a comment on the trade implications of increasing the ECGD's limits. I understand that, with the growth and variation of international trade, it is necessary not only to increase the amount available but for the Department to take into account trade with different countries, and it may be that, quite apart from running down sterling as a reserve currency, there are trade reasons which would make the foreign currency facilities useful. I should like to know the Government's plans for providing ECGD facilities in the currency quota, as opposed to the existing sterling quota, as increased.
I had great difficulty in understanding what was meant by the reference in Clause 7 to payments to international development banks. The right hon. Member for Lanark (Mrs. Hart) seemed to have a similar difficulty and was not sure whether Dr. Kissinger's proposals would come under this arrangement. The clause refers to
all types of payments which fall to be made to such banks in pursuance of arrangements by which Her Majesty's Government in the United Kingdom becomes bound.
That conjures up the picture of the Government waking one morning and saying "Goodness me, we are bound by an


international agreement. We had better make sure that we can make the payments." No doubt this is not the true situation, but it comes across in that way, and it would be a help if the Minister could comment on the type of payment involved and the nature of the international banks as opposed to the regional banks.
I thought that instead of substituting international banks for regional banks the Bill would have added the international to the regional banks. It may be that all international banks will supersede regional banks or that all regional banks will be consumed within the new international development banks, but it is not clear what the legislation is trying to achieve.
If I may turn to another technical comment on the presentation of these matters, paragraph 10 of the Explanatory and Financial Memorandum refers to the Overseas Development Act 1968. I have spent a great deal of time trying to discover what that Act does. There may be a misprint in the Bill, and it might be supposed to refer to the Overseas Aid Act 1968. If not, no doubt a number of other hon. Members will also have had some difficulty tracing the Act referred to and discovering its relevance to the Bill.
Despite the attention paid in this composite Bill to the affairs of the ECGD, the CDC and the development banks, the heart of the matter lies in the proposals for the IMF. I agree with the hon. Member for Sheffield, Heeley (Mr. Hooley) that it is surprising to have these proposals brought forward now when there is to be a review of quotas next year. I suspect that the reason is that it has taken such a long time to agree the last quotas that we are running into the time for their revision. It is rather like the workings of our own Boundary Commission. That might also explain why we have had only two amendments to the articles of the IMF since it was established. It may be that a great permanence was achieved originally, but the last and varied membership, often with divergent views, makes it difficult to achieve the unanimity required to put through amendments.
There is no doubt that the proposed amendments to the articles mark a major

departure in the approach of the IMF. Floating exchange rates are recognised at last and the changing function of gold is also formally recognised. The rôle of SDRs, which have come forward remarkably satisfactorily, are built in more formally to the articles of the Fund.
Nevertheless, as my hon. Friend the Member for Hertfordshire, South said, the Fund is still reacting to events rather than having a creative rôle in international monetary affairs. I do not criticise it for that, because events have moved fast.
Looking at the impact of oil money, two or three years ago the most appalling upheaval in international financial markets was predicted. There were considerable strains. The situation has now subsided into a more orderly pattern, although it has caused great economic difficulties within many industrial and nonindustrial countries. This new realism of recognising the status quo is a step forward by the IMF, but it will be a long time before it acts as a leading force in these plans. I welcome the initiatives taken by the IMF in relation to the oil facility and various other technical arrangements which have been made in the last three or four years.
But a word of caution is necessary about the functions of the IMF. I do not believe that it ought to be combined or absorbed within the World Bank. It ought not to become an organ of international aid. It ought not to create credit by the issuing of SDRs to less developed countries. That does not mean that I disagree with those objectives. I merely say that it is hard enough for the world monetary system to sustain itself with a reasonable stability of exchange rates, of payments between countries and of convertibility of the increasing number of currencies which are now used in international trade, without the IMF essentially taking on different functions from those which it was set up to perform.
One of the objectives is to encourage growth in world trade and economy. That function of the IMF is embodied in its duty to try to provide a stable and systematic base from which this growth can take place. I do not believe that it exists to offer soft loans, free SDRs, cheap credit or anything else by which those objectives can be forwarded. Those


objectives are much better handled by specialist agencies, which in many cases already exist, but which in future will need to be added to in order to fulfil our responsibilities internationally. By "our responsibilities", I mean those of this country and of the industrial world as a wholethe—major members of the IMF.
As it stands, the IMF is not a world bank. It is a monetary fund, and it is basically concerned with the monetary system. It should remain so, but it will have to learn to react rather more quickly to changing conditions and events in the monetary sphere. I do not think that 1974 was a momentary aberration in an otherwise smooth pattern of international monetary and economic development. I think that in the last quarter of this century upheavals are likely to be as much the rule as the exception.
When the Bretton Woods Agreement was originally signed—the British Government had an important part in setting it up—and in the following 15 years it was permissible to believe that the regime of stable exchange rates and a sustainable level of economic growth was more or less a permanent feature which would go on indefinitely in future so long as everybody continued to behave as before, but, with the benefit of hindsight, we all know that was not how it turned out. Events have moved so fast that the shape and balance of the IMF has been changed in the process.
Many hon. Members have referred to the fact that the oil-producing countries now have a more substantial quota within the total. That is absolutely right within the context of today's IMF, but it leads me to wonder on what basis these quotas are calculated and whether, for example, the United Kingdom's share is likely to go on shrinking at a fairly rapid rate even though absolutely it may rise. An increase of 4·5 per cent. against an average of 32½ per cent. is a considerable decline in our relative status.
Are these quotas settled in relation to the volume of overseas trade of the country concerned? Are they settled in relation to the amount of international reserves held by the country concerned at any particular time? Are they affected by the extent to which the currency of the country concerned is or is not an international reserve or trading currency?
We have recently negotiated a facility of 3·9 billion SDRs from the IMF. That was made available to us because of the 45 per cent. temporary increase in January 1976 to the then quotas. Each country is allowed to draw 125 per cent. of its quota. On the basis of the new quotas, 125 per cent. would take us to about 3·6 billion SDRs. In theory, at least, it seems that we shall have a lower borrowing power from the IMF when the new quotas are adopted than we had under the temporary increase available on the previous quotas. That matter was not mentioned by the Financial Secretary. If that is the case, the Government should make it clear that the quotas now proposed would give us a lower credit limit with the Fund than has previously applied.
When is the second amendment to the articles of agreement of the IMF likely to become effective? The Bill paves the way for our fulfilling the quota part of this agreement. The articles cover a wide range. For example, they lay down in some detail the IMF's functions regarding surveillance of exchange rates. I am left in considerable doubt as to what is meant by that. According to the text of Article 4 the Fund will be able to ask for information and members will have to provide it. When the Fund requests, members will have to be ready to discuss their exchange rate policies and so on. I wonder how that will operate in practice. Does it mean that, sitting at the elbow of one of the directors of the Bank of England when this country has an IMF facility, there will be somebody saying "No, you had better not keep sterling at 1·71. We think that you are getting an unfair advantage for your exporters. The true international competitive rate for sterling is at least 1·80." Will there be a dialogue of that kind going on all the time?
These are not theoretical questions. They are extremely relevant and important. If that article means anything it means that there will be some active influence on the exchange rate policies pursued by members of the Fund. I should have thought that that influence would be directed towards those members who may have drawn on the Fund at any particular time, because it would be those countries in which the IMF for the time being had the greatest vested interest.
I have no doubt that it will take a good deal of time for the pattern to develop under the new articles. I do not expect a system to spring into being the moment that the articles are adopted. However, I think that we should be aware of what we are doing. We are proposing to support a Bill, part of which is due to change the relationship of this country with others in international monetary affairs.
We have a considerable influence on the way that those changes are made. It is true that this country has been one of the leading advocates for a reduction in the rôle of gold internationally. Very few would quarrel with that as a general principle, or with the way in which it has actually been achieved, but I for one would be sorry to see gold completely removed from the system. That is not because I have a special desire to hold a form of precious metal that has appealed to man over thousands of years. It is a fact that the IMF includes only a certain number of the major countries in the world. There are many who would not be able to stick a SDR in their pocket and flee a hostile regime. There is no doubt that other forms of international currency will remain important, and it would be unwise if the reduced r rôle of gold in the IMF were to be carried to the extent where it would be eliminated altogether.
The system of SDRs provides something that is much needed. It is interesting to note that the Government have chosen to denominate the foreign currency quota in ECGD in SDRs instead of dollars, units of account or whatever. I suspect that that is indicative of Govvernment thinking. I do not think that there will be any harm in that. We shall have to allow for adjusting the exchange rate. I think that it is about 14 shillings for a SDR at present, but, no doubt, that will change. If SDRs are to develop in importance we must recognise them for what they are. They are drawing rights, and they can be transferred. In that way they have a certain currency value, but they are not currency in themselves. I see that the Exchange Equalisation Account is allowed to acquire SDRs and that they can be transferred from one country to another, but they do not have all the classic ingredi-

ents of an international currency. We are a long way from a situation where that would be so.
During the 1960s there was a long debate about the functions of SDRs and the question of whether we were talking about a shortage of liquidity or a shortage of credit. The general argument for increases in SDRs was that there was a shortage of world liquirity, but I do not think that that has ever been true in the past 10 or 15 years when this debate has taken place. I think that there has been an acute shortage of credit internationally. That has appeared, particularly with the less developed countries in the past three years. It has appeared in our own case and with some industrial countries whose balances of payments have gone badly out of kilter but I am doubtful whether this is a chronic or serious problem.
Finally, I add a word of caution. There is no intrinsic merit in merely multiplying the number of SDRs so that we can put a larger quota opposite the name of each country in the schedule. SDRs are related to contributions to the Fund, and just in the way that by printing money domestically we can create domestic inflation, I believe that by increasing the number of SDRs without an increase in the resources of real funds available to the IMF we shall be in danger of creating inflation internationally with all the greater dangers that that would have.
It has been useful that the House has had an opportunity in the context of this tripartite Bill to range over related problems. In a Second Reading debate that is fair enough, but what I doubt is whether, in dealing with the technicalities of a Bill of this sort, it is convenient to have the different technical problems all thrown together. Many of us have found it difficult in making our comments to be as skilful as my hon. Friend the Member for Hertfordshire, South in covering the ground yet not getting too bogged down in detail. I am sorry that I have detained the House for so long but I have found it impossible to deal with all the aspects of the Bill in a few moments.

7.46 p.m.

Mr. Nigel Forman: I begin, as all speakers have done, by paying due tribute to my hon. Friend the Member for Hertfordshire, South (Mr. Parkinson) for his excellent speech in


opening the debate for the Opposition. I think that all my hon. Friends wish to support the Government in giving the Bill a Second Reading. It seems in principle to be largely uncontentious.
The Bill is obviously the legislative outcome in Britain of the package of agreements reached in Jamaica in January 1976. In turn, those Jamaica agreements seem to be part of the necessary adjustment in international monetary relations following the gradual breakdown of the Bretton Woods system in 1971 to 1973, that in turn following the American decision in August 1971 to end the convertibility of the dollar, and the rise of the OPEC countries in both political and economic terms over the years 1973 to 1975. In my view, we are now legalising or codifying the various changes in the exchange rate adjustment process and the creation of new international liquidity that have taken place over recent years.
Clause 1 has been commented on by a number of those who have preceded me and I have only one comment to add. It seems that this part of the general adjustment in national quotas that has become necessary is to take account mainly of the increased wealth and power of oil producers and, at the same time, the claims of the developing countries to have a greater say in the IMF.
It is interesting that the new arrangements still leave the United Kingdom in second place with a voting power of 7·49 per cent., roughly a third of that of the United States where there is a GNP and a per capita income much more than three times greater than our own. However, the real anomalies appear when we look at the list of proposed quotas and the new rank order. There are the anomalies between Britain and our partners in the rest of the OECD, many of whom have long ago surpassed us in wealth and power. I am thinking especially of West Germany, which is to have only 5·52 per cent. of the quota although it is a country with more than twice Britain's share of world trade. Japan will have only 4·25 per cent. of the quota notwithstanding its enormous and growing wealth and power. France is to have 4·92 per cent.
The quotas of some of the OPEC countries have been quadrupled, as in the case of Saudia Arabia, trebled, as in the case of Iran, or doubled, as in the case

of Venezuela and Nigeria. However, if we put all the OPEC quotas together we still find that they fall quite a long way short of a 15 per cent. blocking vote within the IMF. It is significant that, even after all these changes have been pushed through laboriously and with great difficulty, we still find that it is Uncle Sam who holds the whip hand on all the big decisions within the IMF. There is a moral there somewhere.
The adjustments that have taken place bring the voting power in the Fund more into line with modern realities but they still do not go far enough to bring Britain itself and the British Government up against the realities and dimensions of this country's world position. I wish that they did. I say to the hon. Member for Sheffield, Heeley (Mr. Hooley) that one of the reasons that it is good to have frequent revisions of the quotas is that it is sometimes easier to drag nations and Governments into international reality by taking two or three bites at the cherry. It is sometimes easier to achieve that objective by the process of grandmother's footsteps, so that every time the Government look around, they do not realise quite how far they have been brought towards reality.
Clause 2, which in many ways is the most interesting aspect of the Bill, enables the United Kingdom to give effect to the proposed second amendment to the IMF articles. Probably the most significant aspect of this part of the Bill is that all the leading countries involved, and notably the two main protagonists in this great international monetary debate over recent years—I refer to France and the United States—have recognised their basic economic interdependence and the need for co-operation rather than conflict in this sphere of their activities.
In the Jamaica package it could be said that all the major parties secured at least partial satisfaction in the eventual compromise that was reached. On the vexed question of gold, for example, it could be said that the French secured a partial victory by getting agreement in August 1975 to a review of the arrangements then agreed within two years to see whether to continue, modify or terminate those arrangements. Therefore, one could say that final demonetisation of gold has been postponed and could theoretically be postponed indefinitely.
On the question of exchange rate adjustments, I suppose that it could be said that the Americans were more successful in getting what they wanted in that the proposed new Article 4 serves to codify and legalise the present wide variety of exchange rate régimes applied by the different member countries while at the same time erecting that significant barrier, namely, the 85 per cent. majority, to which I alluded earlier, against the reintroduction of the par value system.
As for the claims of the developing countries themselves, it seems that the negotiations in this package went at least some way towards meeting their claims also, in that we have seen a modest increase in their voting power relative to that of the industrialised countries, an increase in the Fund's total resources to 39 billion SDRs, the easing of the rules on compensatory financing, and finally, the rather hopeful establishment—I believe—of a trust fund to provide loans on soft terms to the poorest developing countries. Those countries are defined, as I understand it, as those with a per capita income of below 300 SDRs.
Therefore, Clause 2 is quite significant. It goes to the heart of the Bill. It is a subject to which we shall want to return in Committee.
It seems that Clause 3 is supposed to reflect the wider rôle that is planned for the SDRs in international monetary arrangements and, by implication, I suppose for the IMF itself. However, I believe that it is still legitimate for us to be sceptical about what all this will mean in practice, and it will be wise to hold to our provisional conclusions that the IMF is still something of a paper tiger, no matter what Labour Members below the Gangway may sometimes imagine, at least concerning the control of international liquidity.
Obviously one welcomes the commitment, in Article 8(7) to the objective of
promoting better international surveillance of international liquidity and to making the SDR the principal reserve asset in the international monetary system.
However, I must say that I believe that, notwithstanding that pretension, we are quite a long way from making that objective a reality. After all, it is true to say that from December 1969 to June 1975 international liquidity rose by some $150

billion—from $80 billion to $230 billion—but that controlled money creation by international agreement amounted to only about one-tenth of that total. The rest was done by other means.
Therefore, the fact is that full inter national control over international liquidity will require something much more ambitious than we have yet seen in this agreement. I believe that it will require something akin to a universal agreement on the part of all the member States to swap their present reserve holdings of currencies and gold for SDRs, and I am sure that that particular day is quite a long way off.
I believe that the real breakthrough on international collaboration, which is touched upon in the Bill, seems to have come from the basic realisation on the part of all leading nations, and, indeed, on the part of the more conservative members of OPEC as well, that exchange rate stability is best preserved not primarily through intervention or exchange control but rather through stable and mutually reinforcing domestic policies. That is the realisation that lies behind the four key obligations set out in Article 4(1) of the proposed new articles of agreement, and these obligations, if they really mean something, will, I think, prove to be quite significant in guiding the spirit and the broad purposes of the forthcoming international discussions on how to deal with and manage the international economy to which my hon. Friend the Member for Hertfordshire, South referred.
It is the hope that lies behind the more optimistic statement, equally, on par values in section (4) of the same article, which looks forward to
arrangements under which both members in surplus and members in deficit in their balance of payments take prompt, effective and symmetrical action to achieve adjustment".
Once again, that underlines how the IMF is rather long on the statement of fine objectives and rather short on its real political capacity to carry those things out.
None the less, we should pay tribute to it for having at least identified the ideal objectives, even if it would take something akin to a real world to realise them. That day might be a long way off, but it bodes quite well for the cause of international co-operation that the member States themselves should be aware of and be


prepared publicly to subscribe to such ambitious long-term objectives.
I turn briefly to Clause 4 and Schedule 1, the part of the Bill dealing with the ECGD, to make just a few layman's comments. It seems to me that to allow the changes that are suggested here is a move in a sensible direction, so long as one is convinced that export credits in this form are both unavoidable and worth while. There was an interesting leading article in the Financial Times towards the end of 1975 which concluded with the rather pertinent observation that,
It is questionable how far it is worth doing this"—
the "this" concerned improving the United Kingdom current balance of payments with more exports—
by borrowing short and expensively to lend long and cheaply to anyone who will buy our goods.
That must be the reservation in the minds of all of us about the apparent rapid and almost uncontrollable growth in export credit guarantees.
I know that it has been argued—as it has been argued by the Government Front Bench—that we must do this to get our share of certain product markets, for example, large plant contracts in many parts of the world, and, equally, to to improve our share of certain geographic markets, for example, Eastern Europe, which is often quoted, and the Soviet Union, and our share of the kind of turnkey jobs involved in the Middle East. I realise that this is a newball game in trading terms to what it was some years ago. Nevertheless, we need to question some of the principles behind it.
I sometimes wonder whether the whole export credit guarantees system is really little more than an elaborate, indirect and disguised way of subsidising exports, preserving jobs and giving financial help to British companies, for those two very worthwhile priority purposes, but in a way which appears more acceptable and less obvious to the British taxpayer. After all, if one can give potential customers credit on easy terms and thus encourage them to buy British goods, this is quite a crafty indirect way of supporting one's own domestic industries without necessarily incurring all the opprobrium of direct expensive hand-

outs to those industries, which in other terms or circumstances might not be so desirable.
In any case, I should like the Minister tonight—or perhaps one of his colleagues later in Committee—to comment on the present position which, as I understand it, is that export credit terms at least within the EEC are now legally a matter for the Commission and not for national Governments. I want to know whether that is true and, if it is, how it fits into the general scheme of things under the Bill.
The Commonwealth Development Corporation is dealt with in Clauses 5, 6 and 7. I am sure that all of us in the House support the activities of the CDC and pay tribute to its achievements over many years. I should like to know, however, whether the extended borrowing proposed will fall within the scope of our present aid programme or whether it will in some way be additional to it. Furthermore, can the Minister give us some examples—this is pertinent, I believe, to Clause 7—of the sort of international development institutions to which a Minister would be able to make payments if the British Government entered into appropriate international agreements in the future? Are we thinking about the IDA and the World Bank, or are there some other institutions in mind which do not occur to me at the moment?
In general, I am sure that all of us on this side of the House wish to support the continued activities of the CDC, which, as I say, has been most successful and whose programme seems to be absolutely consistent with the whole drift of our aid policy—which even for its logic, if for no other reason, must be regarded as admirable. The emphasis on help for the poorest people in rural areas and the so-called renewable natural resource projects, which now, I believe, account for about 55 per cent. of total CDC investment, must be regarded as good.
I have one small personal reservation about the activities of the Commonwealth Development Corporation, and that is with reference to the Caribbean, an area which I know and have visited a little. I see that quite a bit of the money invested by the CDC has been going into tourism of one kind or another and into traditional cash crops, notably sugar, and one or two other things as well.
I wonder whether in islands such as Antigua or St. Lucia—which I have visited and where I have spoken to the people—that is necessarily the most appropriate form of investment for Britain to make at this time when the consequences of long-term steady investment in tourism in such small islands may often be to generate greater inflation than would otherwise occur, greater expectations and considerable social and other dislocation. These matters were referred to, if I recall aright, in one of the reports of the Select Committee on Overseas Aid.
Will the Minister consider that aspect of the matter? Might it not be better to put the money into straightforward food production instead? This would achieve two purposes: first, it would lead to considerable import savings for the countries concerned; and, second, it would enable them to compete for themselves and put them on a basis far more favourable than being dependent on cash crops, often monoculture cash crops, which, as we have seen in previous years, can fluctuate greatly in price in world markets.
On the whole, this must be regarded as a sound Bill which we shall all wish to support, although the many points which have been raised today and which will be raised in the winding-up speeches will have to be pursued further in Committee.

8.4 p.m.

Mr. Terence Higgins: This is an important composite Bill, and it is interesting to recall that back in July 1965, when a much narrower Bill concerned only with the increase in the quota was before the House, the then Chancellor of the Exchequer, now Prime Minister, thought it right to open the Second Reading debate. That is an interesting comparison to draw, since I suspect that the present Government are in danger of getting into a rut, saying to themselves "Here is an increase of IMF quotas and so on. It is jolly useful to have the IMF, because we can borrow from it; it is nice to have the CDC and expand export credits because we are not actually reaching any agreement with our competitors on what to do about it; and it is good to provide for overseas aid as well", but I suspect that a good deal of it is mere lip-service, and in fact the

amount of overseas aid which we ought to provide is being cut.
It is important, therefore, that we have this opportunity to debate the measures now before us. I join with all those who have congratulated my hon. Friend the Member for Hertfordshire, South (Mr. Parkinson), who made the opening speech from the Opposition Front Bench. It is not practicable for me in a short speech to cover all the matters dealt with in the Bill, since it includes not only provisions relating to the CDC and overseas development but the ECGD and the IMF. I shall say a word or two on the export credit guarantee side, and then concentrate on the IMF, taking up some of the points made by my hon. Friend the Member for Hitchin (Mr. Stewart), for example, in his excellent speech.
First, on the question of export credits, I reinforce what has been said already and re-emphasise what I have said on many occasions in the past few years about the danger which I see in relation to export credit. The truth is that we are giving export credit on very favourable terms in response to competition from other developed countries in the OECD and elsewhere. In my view, this is a matter on which we ought to reach a general international agreement, but the Government have shown less enthusiasm than they should in seeking such an agreement, with the result that in many ways we are giving our resources away for a much lower return than we ought to achieve.
In this connection, I stress a point which has been made both today and previously but on which we have had no clear assurance from the Government. I refer to the extension of export credit to COMECON countries. We all recall how the right hon. Member for Huyton (Sir H. Wilson), when Prime Minister, came back from Russia and, with great publicity, told us that a tremendous deal had been arranged and explained how we should extend export credit to the Russians. We all know, however, what a fiasco that has proved to be and the extent to which Ministers have since reserved themselves to making speeches saying how sad it is that the Russians have not actually taken our exports.
At the same time, however, in many ways this is a fortunate state of affairs because, although I believe profoundly


that we must keep our export credit terms competitive, I am certain that we ought to consider whether they are so favourable to those to whom we export that we are virtually giving goods away. I see great danger here. In fact, as I have said, the amount of exports we have made has not been all that great, but the overall amount of credit which has been extended by the industrialised countries of the OECD to the COME-CON countries is now terrifyingly large. I hope that the Minister will give us some up-to-date figures showing precisely what the position is.
In October last year, I gave some figures which suggested that the credit extended to the Soviet Union from the industrialised countries totalled about $60 million in 1959, $1,000 million in 1972 and $1,500 million in 1973. I understand that the figure now is even greater—a great deal more than the last figure which I have just given. I hope that the Minister will give us an up-to-date estimate of the total credit which is available and the amount of it which has been taken up.
The present situation is very dangerous, not least because most of the credit is being used—this certainly applies to our exports—on buying capital goods, and those capital goods are then used to produce consumer goods which are re-exported back to the West. Many of them, I believe, are being dumped on our market. The classic example is the textile industry. We have been exporting—this is explicitly mentioned in the deal agreed with the Russians—a great deal of textile machinery, but adequate action is not being taken against dumped exports from Communist countries. The precise extent to which this has happened is difficult to ascertain, but it was certainly the intention of the present Government that such an export of capital goods should take place, and I hope that the matter can be clarified in the context of the present Bill.
I shall now turn to some of the other important points which have been raised about the International Monetary Fund and to take up a point made by my hon. Friend the Member for Hitchin. We welcome the increase in resources which is created in the Bill in connection with

the IMF. I was puzzled when the Chancellor of the Exchequer came to the House to make his statement about the $3·9 billion loan for the reason which my hon. Friend the Member for Hitchin has already mentioned. What is the maximum amount that we can obtain under the present arrangements which includes the 45 per cent. temporary increase?
It has been said that we are to draw down this credit loan over a period of two years, but it seems likely that the new quotas will be ratified by the end of this year. We are puzzled about how we can proceed if the limit is reduced in the middle of this year and we are still drawing against the original limit.
I failed to get an immediate answer from the Chancellor of the Exchequer at a recent Question Time, but he courteously wrote to me and said that as we have negotiated ahead of the ratification we are able to carry forward the extended temporary limit beyond the period that the articles ratify. That is an extraordinary situation and shows the extent to which the Government are extending their borrowing and that it is above the limit that would otherwise apply if they had not managed to get in in time.
Can the Minister say how many other countries will be in the same position as this country? It would be interesting to know. Our borrowing is vastly greater than that of any other country. How many other countries have made arrangements to draw over and above that which will apply when the quotas in the Bill are agreed?

Dr. Bray: It is possible to put another interpretation on the two-year period and to ask why we could not draw the $3·9 billion over one year and thus manage to achieve a higher rate of growth in our economy.

Mr. Higgins: That is a good question which I shall leave to the Minister to answer. It is not clear why it was not suggested.

Dr. Bray: I understand that the reason was that we wanted to but the IMF would not let us.

Mr. Higgins: I leave the Minister to respond to that.
The Government are borrowing up to the hilt on every occasion. That brings me to my next point. What is the precise exchange rate policy of the Government? That is of vital interest to exporters and others. The surveillance of the IMF will operate under the Bill. It would be helpful to know what is the Government's intention, because the official forecast rate of inflation in this country is 15 per cent.—a great deal higher than that in a number of countries. Is it the Government's intention to maintain a present parity or do they intend that the rate should fall if there is a difference in the rate of inflation between ourselves and our competitors?
I now turn to the more technical aspects of the matter. But first I ask the Minister to tell us why we are not to be given the details of the new arrangements until tomorrow. The Financial Secretary flannelled about this but he did not say why the Government have been so discourteous to the House, or why the debate could not have been delayed. I see no good reason for that.
Some of my hon. Friends and, indeed, the Financial Secretary, suggested that this was only the second set of amendments to the articles and that this reflected the good job which was done at Bretton Woods. But I have a nasty suspicion that it also reflects the difficulties involved in reaching international agreements. However well or badly the articles were drafted it has been difficult to get the reforms carried through.
We should pay tribute to the work which has been done by many people. In particular I want to stress that the momentum to these matters was first introduced by the present Lord Barber when he was Chancellor of the Exchequer in a speech to the IMF in 1971. He put forward proposals for reform which form the basis of our thinking on this subject. It was also carried forward by Sir Jeremy Morse in his work as Chairman of the Committee of 20. In a lecture to Reading University he said that the picture now was like a kaleidoscope and that floating around in it were the terms of the previous Bretton Woods system, the Committee of 20 proposals, amid bits and pieces of international monetary reform but it had not

shaken down to a fixed parity. That is still the case but the Bill will carry us forward to some extent.
The details of the articles have been drafted with care, as were the original articles, by the legal staff of the Fund and it is right to pay tribute to their work and the difficult task which they have done. The main argument of whether we should have a system of fixed or floating rates is in limbo. It is not clear what the future holds. Sir Jeremy said that we are in:
a recurring cycle of exchange rate regimes. A fixed rate system is established; in the course of time it becomes unstable; when it breaks there may be a brief period of free floating, but this soon gives way to a mixed system with a large element of flexibility; this proves to be unsatisfactory and when conditions permit a fixed rate system is restored.
One should carry through major reforms of the system which can use either the fixed rate system or the floating rate system as a basis.
I welcome the changes in the Bill. I welcome the change made in the rôle of gold, not only for political reasons but because technically there is a lot to be said for changing to that system. Lord Barber said that we should move towards SDRs. We are still a long way from having SDRs as a main asset, but that is a situation towards which we will move. There is much to be said for a floating rate system rather than a fixed rate system as the basis for international monetary reform.
There is also the problem of credit rate control. If it were uncontrolled it would have an inflationary effect throughout the world, although the mechanism by which it pervades the system is complex. We should have an SDR system because it enables us to control liquidity. If we rely, as we have in the post-war period, on the United States deficit, which is of uncontrolled magnitude, the chance of avoiding inflationary pressures and political tension is less than would otherwise be the case.
There are still some issues which have not been resolved in the amended articles. The valuation of the SDR is still put in slightly vague terms. Much of that problem has yet to be resolved.
I know that my next question is a matter of particular concern to the Minister. Does he now see any possibility


of linking the creation of SDRs to overseas aid, the so-called link which was very fashionable some years ago? I still think that it has considerable merits. Have the Government any thoughts on that subject?
I turn from the problem of liquidity creation and the control of liquidity creation to the more difficult question of the so-called adjustment mechanism and the way in which the various changes in currency rates can be used to adjust international flows. Here the Bill and the corresponding White Paper, Cmnd. 6705, on the Second Amendment to the Articles of Agreement of the IMF, have interesting things to say. My hon. Friend the Member for Carshalton (Mr. Forman) was right to ask for a precise explanation of what is meant by "Surveillance over exchange arrangements" set out on page 10 of the White Paper.
Perhaps I may put the matter in a specific context. I was horrified by the way in which the Bank of England and the Treasury appeared to manage the country's affairs the day the sterling rate went through $2 to the pound. I had always thought of that figure as a psychological barrier, rather like the four-minute mile. To cut interest rates on the day we went through a psychological barrier of that kind was very strange. If the IMF had been overseeing us then, the suspicion that we did it in order to make our exports more competitive might have been very strong. As it was, a number of countries expressed doubts. Precisely how does the Minister envisage the surveillance arrangement will work for the United Kingdom? I see that he laughs. I can understand that, for I expect that the exact content of the clause will require considerable elucidation. I am not saying that it is necessarily bad, but I should like to know how it works.
As I understand it, the clause does not apply simply to those in debt to the Fund but will apply equally to those countries with a strong reserve position and perhaps a strong balance of payments. Apparently, they will also have the surveillance imposed upon them by the IMF. I am far from clear that that will necessarily be a bad thing, but if the Government are asking us to approve the Bill, we want some idea of how they see it working in practice.

Dr. Bray: With the hon. Gentleman's experience in the Treasury, would he expect it even to tell the Foreign Office, let alone expect a Foreign Office Under-Secretary to tell the House?

Mr. Higgins: I am relying on the fact that there are serried ranks of people who may be listening to the debate and may in good time provide suitable written advice. I know that I may be disappointed, but it is right that the question should be posed, even if we do not receive the answers straight away, because the Government should not put before us White Papers saying that this or that will happen if they have no idea how.
I turn to an even more complex matter, the whole problem of what in the Bretton Woods system used to be called the scarce currency clause, the original arrangement intended to bring pressure to bear on those countries which were not operating in the way originally envisaged, preventing suitable movement of exchange rates to achieve an adjustment when their rate should be appreciating. I have always been strongly of the view that it would be a good thing to have an automatic mechanism to bring that about. Keynes thought that he had it, but, alas, he was mistaken. It did not work out that way. Over the years, there has been an asymmetry, with the pressure on debtor countries to put their house in order being a great deal better than the pressure on creditor countries to do so. That has tended to skew the whole international monetary system.
I believe that the practical, political difficulties of reaching agreement on this matter are immense. I should like to see an automatic system, because that would remove from officials and Ministers the problems of negotiating each case individually, with extraneous factors being brought into play to persuade the IMF not to take the requisite action.
However, I think that the present proposals will do something to help get creditor countries to take suitable remedial action. This is not only a question of designation, so-called, but also a proposal that the Fund
may issue a report setting forth the cause of the scarcity and containing recommendations designed to bring it to an end. A representative of the member whose currency is involved shall participate in the preparation of the report.


I hope that the Under-Secretary will give some indication of how effective and determined he believes the IMF will be in applying that provision, because it is essential that we should bring into the system a degree of symmetry which has not been easily achieved.
These are all highly technical matters, but I think that we have been right to take up a number of them in this debate, and I hope that we shall receive an adequate reply. I should like to end by quoting from the speech of the present Lord Barber to the IMF in 1971, when he put forward the plans which have in many ways formed a basis for subsequent discussion, although by no means all have been implemented. He said:
To the outside world our discussions here this week must often seem theoretical and esoteric".
The same is true probably of our discussions this afternoon.
yet there is a great responsibility upon us. For we know that our decisions vitally affect the employment and the well-being, the hardship or the prosperity, the happiness or the misery, of millions of people throughout the world. If I were to say that our decisions are a matter of life and death it might seem to some of my colleagues from the developed countries of the western world a mere cliche. To my colleagues from the Third World the life and the death are only too apparent. We must succeed.
We are succeeding only very slowly in reforming the international monetary system, but I believe that we are now making some progress. There are still great technical problems to be overcome, but it is right that we should approve the Bill, which goes some way towards alleviating the problems and is not just a technical exercise but is something that will have an immense effect on the lives of people throughout the world.

8.30 p.m.

Mr. Tim Renton: I start with an apology and a tribute. The apology is to hon. Members for the fact that I had to be out of the Chamber for two hours this afternoon as I told Mr. Speaker earlier. I am sorry that I missed some of the earlier speeches.
The tribute is to my hon. Friend the Member for Hertfordshire, South (Mr. Parkinson) for the expert way in which he steered us through this trinity of a Bill. Trinities are believed in by many people

but are understood by very few. My hon. Friend showed that he had mastered this trinity and has a great understanding of it. He showed, too, that he had astonishing expertise in pronouncing the letters "ECGD". I am sure you will agree, Mr. Deputy Speaker, that those words are rather a tongue-twister and that if one tries to say them fast after midnight one is apt to get them muddled up. But in the case of my hon. Friend the Member for Hertfordshire, South they tripped off his tongue as to the manner born.
I wish to congratulate the ECGD on the remarkable way its business has grown over the past two years and the way it has successfully, although as yet modestly, introduced a number of important new policies. I am also delighted to see that the new form of presentation of the ECGD's trading accounts shows its results much more clearly than did the old accounts. I am particularly pleased to see that the ECGD is still in profit although it is not such a large profit as the year before. It is, however, still a reasonable outturn for the year 1975–76
The Bill marks an important enhancement of the powers of the ECGD, not only in the additional limits but also in the foreign exchange insurance which it will now offer to exporters and merchants. This is a counterpart to the action of the Chancellor of the Exchequer in December in withdrawing permission for exporters to finance trade between third countries in sterling. It had to follow from that that the ECGD would provide foreign exchange cover for such transactions to exporters from this country, and, indeed, to all their exports if they so wished. This is an important enhancement of the ECGD's powers.
While shippers and exporters will now have the foreign exchange risk removed from their shoulders, it follows that the United Kingdom as a whole will be carrying a considerably greater volume of foreign exchange risk. Can the Minister quantify the extent of this risk and say how he proposes to deal with it? There is a further point of detail which I would like to have answered. I understand that in the gentleman's agreement reached last year an interest rate of between 7½ per cent. and 8½ per cent. for over two years' credit was generally agreed by the major exporting nations. This is very much in


line with the current Eurodollar borrowing rate and, therefore, I understand that the need for what is technically called interest mark-up from the ECGD will largely disappear on contracts that are insured and covered in foreign exchange, because effectively the shipper will be able to borrow from his bank at approximately the 7½ per cent. to 8½ per cent. rate which ECGD has agreed with other nations as appropriate.
Is it not the case that the interest rate for the large Russian line of credit to which my hon. Friend the Member for Blackpool, South (Mr. Blaker) often refers is substantially below the 7½ per cent. to 8½ per cent. tranche? Does not that mean that the Government are breaking the gentleman's agreement to which they were a party last year by maintaining a lower Russian interest rate? The Under-Secretary of State for Trade shakes his head. I am glad he has done so, because so far we have been unable to find out what is the interest rate on the Russian line of credit. We would not need to ask these questions if the Under-Secretary would stand up and clear his chest on these matters. The hon. Gentleman remains silent.
There is little left for me to say about the IMF after the extremely comprehensive speeches of my hon. Friends the Members for Worthing (Mr. Higgins) and Hitchin (Mr. Stewart). I take advantage of the suggestion of the hon. Member for Sheffield, Heeley (Mr. Hooley) to broaden the remainder of my remarks to the rôle of official and private aid from this country. The CDC brief is a wide one and my remarks will come properly within the consideration of the additional borrowing powers being given to it under the Bill. My hon. Friend the Member for Hertfordshire, South rightly said that our drawings from the IMF decreased the resources available to the rest of the world, notably the less-developed countries. It is worth remembering that the OPEC decision reached on 17th December to put up oil prices by between 5 per cent. and 10 per cent. placed an extra burden of about £900 million on the balance of payments of the less-developed countries.
It is appropriate when we are discussing, international finance, trade and aid—which is the title of the Bill—to consider for a moment what this country's

contribution to aid now is and to consider that in the light of remarks made by Mr. Robert McNamara at the World Bank meeting at Manila in October. He drew attention to the widening gap between developed and less-developed countries and to the fact that the rich were getting richer and the poor poorer. He particularly drew attention to the 750 million people in the world whose income is less than $100 a year and who, in his definition, live in absolute poverty. He went on to describe absolute poverty as an infant mortality rate eight times higher than in the developed countries, a life expectancy one-third lower, an adult literacy rate 60 times less, a nutritional level for one in two of the population below minimum acceptable standards, and for millions of infants less protein than is sufficient to permit optimum development of the brain. He pointed out also that not only did these 750 million people have an income of less than $100 a year but they had little promise of more than a $2-a-year increase in their income over the next decade.
Measured against such facts, we have to consider that our contribution to official aid in 1975 worked out at only 11 p per head of our population per week. Yet in that year we drank £1·35 per week, or about 13 times the amount of official aid, and smoked 77p a week. So we burn, literally, in nicotine seven times that which we are giving in contribution in official aid to the poorest countries.
Eleanor Roosevelt once said that no one could make one feel inferior without one's consent. I wonder whether the inhabitants of those poorest countries who are aware that official aid from virtually every rich nation is being reduced feel that they are being made more inferior with their own consent.
It is not for me, who have been strident in calling for cuts in public expenditure, to criticise the particular cuts in overseas aid that the Government have made. We cannot have sacred cows—"bullocks" would he the more appropriate word this week—in public expenditure, because we all have our own particular animal, be it education, housing, schools or official aid, that we would like to preserve. Clearly public expenditure has to be cut, and if that is the case the cuts must fall across the broadest possible spectrum in order to be effective.
Against that background of falling official aid, however, it is worth while to consider that increased aid not only is productive of increased trade for the donor country but has the benefit of helping manufactured exports to the recipient country. I go further and suggest a few specific problems and solutions that we should be looking at in 1977, when the whole question of the conflict between North and South, between the less-developed countries and the developed countries, is so much at issue. First, there is the common fund for commodity stabilisation. The Financial Secretary was extraordinarily evasive in answering my questions on it. I hope that the Minister who replies, who I am sure has the problem well on board, will be able to tell us how the Government's thinking is developing about the fund. Negotiations are to recommence in March, and I still have an open mind about it. Many questions remain to be answered. Is it really cheaper than 15 or 16 individual commodity agreements? Is it wise to tie up $6 billion—the estimated cost—in this common fund? Could not those dollars be better used in more direct aid to some of the poorest countries? Clearly, in any common fund there will be a great deal of conflicting national interest as to how it is to be used.
I should declare my interest as a member of the London Metal Exchange. As such, I am very concerned that at the moment one of the most successful commodity stabilisation arrangements—the tin buffer stock—is creaking at the seams. Bolivia has refused to sign the sixth extension of the tin agreement because it is a very high-cost producer and does not wish to sign unless all the price support levels are raised. That is typical of the individual commodity agreements that are in existence at the moment—conflicting national interests often take over.
Against that background, one wonders how a complicated agreement embracing 16 commodities can possibly ever work. None the less, accepting that these are valid difficulties, as a friend of mine from the World Development Movement said the other day the common fund is at the moment the only game in town that shows signs of getting agreement

between the developed countries and the less developed countries. The argument which flows from that is that only if the common fund is agreed to will there be the impetus to make further individual stabilisation arrangements.
I hope that the Government, who made an appalling hash of the negotiations at UNCTAD in Nairobi last year, will be considering possible solutions to the common fund. It would be a pity if they went into this year's conference in the same state of unpreparedness as was revealed in Nairobi last May.
Secondly, I hope that both sides of the House will give thought to Dr. Kissinger's proposition about an International Resources Bank. I should like to see some flesh put on to the bones of that idea so that we can see whether the suggestion of an International Resources Bank, as an ancilliary of the IMF rather than the World Bank, should be pursued as a means of helping developed countries and developing countries to work together to develop mineral and raw material sources in the less developed countries.
I can understand that the old type of arrangement—under which the equity interest of a mine in, let us say, Indonesia always remained in the hands of the European nation—is no longer satisfactory. It is no longer possible to have that sort of arrangement for mineral exploration. We must therefore look for means by which, perhaps once the loans have been paid off, the equity in the mine returns to the host country over a period of years. That would ensure that while the original mining company and the original nation providing the capital get their loans back—and a fair return on their money—the equity would go back to the host country.
It is that sort of proposition that I am sure the International Resources Bank would look at. It needs to be examined, otherwise in five or 10 years' time we shall have a great shortage of raw materials and minerals in the Western world, because mining exploration opportunities are simply not being looked for in the less developed countries at present.
Thirdly, I believe that we must consider means of exporting technology for the further processing of their raw


materials to the less developed countries. Finally, we must increase our attempts to help young people, trained scientists, engineers and agronomists, once they have left university, to take a worthwhile job in the less developed countries for a period of years.
That would be worth while not only for the young people themselves, because of the experience they would gain, but also for the developing country itself. Our efforts in this respect do not have the impetus that they should have. Perhaps the Minister can comment on whether this is because it is an area that falls between three stools—between the Ministry of Overseas Development, the British Council and the CDC.
I note from the official statistics that the number of people working overseas financed by the ODM has, in the case of those partly financed, fallen substantially from 14,000 in 1970 to only 8,000 in 1975. The number of volunteers reported on in these statistics has remained static in those years at about 2,000. That does not seem a great many.
In the director general's introduction to the last report of the British Council, he hints that there could be better participation by private firms and by Ministries in working together to help young people to go from this country to take part in education, agriculture and public health work in the less developed countries. There is an implication in the report that there is not as much co-operation between Ministries as there could be. I hope, therefore, that this is an area that the Government will look at closely. It is not expensive in terms of public funds, and it would fulfil a crying need to provide education for the young who have been trained here and to help them do a worthwhile job overseas.
The problem of diminishing aid is one of which every Western country is guilty at the moment. None is doing well. To solve the problem, there is a need not for long-sounding titles about new economic organisations but for good will and courage. Above all it is people themselves, especially young people, who will show the good will and courage from which in the end we can start to aim towards some of the goals that Mr. McNamara suggested in his World Bank speech.

8.46 p.m.

Mr. Peter Hordern: This has been a most interesting debate upon a complex and sometimes very technical Bill. As my hon. Friend the Member for Hertfordshire, South (Mr. Parkinson) said in his enlivening maiden speech from the Opposition Dispatch Box, it is really three Bills in one, and that factor has made consideration of the Bill extremely difficult. My hon. Friend the Member for Worthing (Mr. Higgins) pointed out that when we last debated these matters in 1965 the Chancellor of the Exchequer opened the debate. Then we had one Bill for the price of one Chancellor of the Exchequer. Today, we have three Bills for the price of a Financial Secretary. We do not seem to have come out of this very well
The hon. Member for Motherwell and Wishaw (Dr. Bray) spoke of the need to change the IMF rules. The hon. Gentleman may not appreciate this fully, but the trouble is that on the whole banks do not generally adjust their rules to the policies of their debtors. It is usually the other way round.
The right hon. Member for Lanark (Mrs. Hart) said that the Kissinger proposals for aid that were produced at Nairobi had turned out to be unacceptable. This seems to be the fate of Dr. Kissinger's latest proposals, and I am sorry that that is the case. But a discussion of the rôle of the IMF has been a feature of previous IMF Bills, and it has generally allowed the debate to range widely over the pet solutions of hon. Members for the reform of international currency arrangements and those for gold. It is very unwise to make any prediction about the future in these debates, and I shall avoid the temptation. But I cannot help reminding the House of two predictions made from the respective Dispatch Boxes in the debate on 28th June 1968. I refer first of all to the speech of my right hon. Friend the Member for Wanstead and Woodford (Mr. Jenkin) who said:
I refer here to my own experience of talking to many American bankers. In the course of the last two or three months I have spent five weeks in the United States doing almost nothing but talking to American bankers. I have come away profoundly convinced that it is a firm political and psychological fact that the Americans will not do that. There is a firmly held conviction that to


revalue gold at this juncture would be tantamount to a surrender. These are not public utterances of politicians which must be taken at their appropriate value. These are the privately expressed opinions of bankers.
The second reason why it would be wrong to pin one's faith on this is that the consequence would be irrational."—[Official Report, 28th June, 1968; Vol. 767, c. 1015.]
He was immediately followed by the Chancellor of the Duchy of Lancaster who said:
The main effect of a doubling of the price of gold would be to increase world reserves and liquidity in a spectacular, unorganised and often irrelevant way."—[Official Report, 28th June, 1968; Vol. 767, c. 1025.]
Well, it was spectacular, it was unorganised, but it certainly was not irrelevant. We have it with us today. It has been a chastening experience to look back on our previous debates. No one could possibly have forecast the events that have occurred.
The last time we discussed this, in 1968, we had the categorical statement that fixed exchange rates were here to stay and that the United States would never allow the price of gold to be increased. This Bill represents a belated coming to terms with reality. There is now no fixed exchange rate and there is no fixed price for gold. Instead we have exchange rates which will not be fixed unless a large majority are in favour—about 85 per cent. majority is needed in order to obtain a fixed rate règime once more. We now have special rules in Article 4 covering the exchange arrangements, a point which was made by my hon. Friends the Members for Hitchin (Mr. Stewart) and Worthing. I ask the Minister winding up to reply to this point about Article 4(1)(iii) which says:
In particular each member shall avoid manipulating exchange rates or the international monetary system in order to prevent effective balance of payments adjustment or to gain an unfair competitive advantage over other members.
As my hon. Friends rightly mentioned, in section (3) there are arrangements for surveillance over exchange rates. I ask the Minister how the Government can sign these articles in the light of the present exchange rate policy which is being pursued by the Bank of England under the authority of the Government. He must know that the rate of exchange is being held down at present and

a large inflow of money is coming into this country. Are these articles meant to mean what they say? If so, what is meant by surveillance? I understood that the arrangement was that regular information must be given to the IMF about exchange rate policy and the mechanics of that policy. I can only assume that the IMF is not being told what is happening.
Another point was raised about the prospect of European monetary union. That seemed to many in this House to be a great prospect, but now it seems to have withered away completely. Under the present règime and the IMF arrangements in the Bill there is no early prospect of European monetary union.
The hon. Member for Sheffield, Heeley (Mr. Hooley) was the only Member to mention the rôle of gold. However, it is a most important factor. Of course the Americans never liked it and for a long time the dollar was the reserve currency. But gold was written into the original Bretton Woods Agreement and it now is being written out.
As I understand the arrangements, the IMF is to restore one-sixth of its gold—that is 25 million oz—to countries in accordance with their quotas. As the Minister knows, our quota is rather a large one. Have we agreed to buy this gold? If so, how much? To what proportion? How will our reserves be made up; in what proportion as to gold and SDRs? I hope that the Minister will be able to answer these important questions.
The remaining one-sixth of the gold sales will go to a special fund for developing countries. So far there have been five sales of gold and they all appear to have gone off quite well. I understand that there is some feeling that for the sake of developing countries these gold sales may be held more regularly than at present. It has been suggested that they might be held as regularly as once a month. Perhaps the Minister will comment on that, too.
There seems to be quite a healthy appetite for gold, despite official discouragement. About $320 million has now been raised for the trust fund for developing countries. I agree with my hon. Friend the Member for Mid-Sussex (Mr. Renton) that it is not nearly enough to help materially a deficit on a current


account of $31 billion for the developing countries last year.
In Manila, Mr. McNamara, President of the World Bank, said that the poorest nations, excluding the oil exporters, would have a total medium and long-term debt of $49 billion in 1980, and my hon. Friends the Members for Gosport (Mr. Viggers) and Mid-Sussex made this point. Mr. McNamara also said that the resources of the IDA would come to an end by 1st July this year without the fifth replenishment—that is to say 900 million people are now in absolute poverty in the developing countries.
Mr. McNamara hoped that the fifth replenishment might amount to $9 billion. As my hon. Friend the Member for Worthing asked, what about the common fund for commodities? Is it of the order of $6 billion? What is the news about that? I am sure that the Minister will be able to tell us. Here we are talking about a $9 billion replenishment for the IDA in July—the fifth replenishment—yet this country has borrowed more than that since March 1974, since this Government came to power.
I do not think, therefore, that the rôle of gold will be diminished as a result of the action of Governments or as a result of the IMF. The value of gold will be just what the creditor countries attach to it. If I had to make a prediction, in spite of all that I have said about past predictions, it would be that gold will have a long and flourishing existence ahead of it and that its value will tend to be greater the more that SDRs are created.
That is not to say that it will achieve much official recognition. There have been too many alarms and upsets in recent years for there to be much confidence in any artificial SDR system. Of course, that system will have to do for the time being, but I do not think that this arrangement that we are debating will be a permanent one, and nor do I think that it will be left unmodified. I dare say—and I hope—that it will be substantially improved. For the moment, however, SDRs seem to be the best system we have of SDRs.
Since 1945 the quotas in the IMF have been increased three times—in 1959, 1965 and 1970.

Dr. Bray: Is the purport of the hon. Gentleman's remarks that the Opposition now support a return to the gold standard?

Mr. Hordern: The hon. Gentleman quite misunderstands me. I do not think that there is any prospect of a return to the gold standard. I am saying two things; gold will not decline in value as a commodity and the SDR is not the final solution to the problems of international currency. I am sure that the hon. Member for Motherwell and Wishaw will agree. I do not think that it is necessary to have perfect faith in SDR or to proclaim it. If one read past debates in the House one would find predictions of what would happen with a system of SDRs, but that would not be a happy experience.

Dr. Bray: The hon. Member appears to be saying that although everyone accepts that the SDR system will evolve, the system is unsatisfactory. His remarks appeared to build up the rôle of gold. It sounds as though the Opposition are inching towards a return to the gold standards.

Mr. Hordern: I have spoken before in these debates and I have always held that gold will have an increasing value because no man-made paper system can for ever attract and command the confidence of the whole world. But I am sure that the SDR system is the only one that is possible in present circumstances. I see no hope of the use of gold as international exchange, much though I might personally wish it. I go so far as to say that.
But, speaking as Opposition spokesman tonight, I agree that there is no prospect of going to gold and I have confidence in the SDR system. It is not perfect and we shall find improvements to make in it as time goes on.
There can be no doubt that the present arrangements—and we have had three reviews during the last 12 years—will be insufficient. Perhaps the Minister will tell us when the next round of increases of SDRs will take place. I know that it will be within his compass to do so. It seems that neither the United States nor West Germany favours substantial increases in SDRs, but the rest of the world does. That was the point of the remarks


that I was making earlier in which the hon. Member for Motherwell and Wishaw was so interested.
This will not be the final arrangement and I am sure that we shall be asked for increases in SDRs before much longer. Unless quotas are increased, it seems that there will be substantial and intolerable strains on the present Eurocurrency market. The market has done its own recycling from the oil surplus countries very well. It successfully recycled $40 billion last year. In the banking system there has not been, as predicted, a problem of liquidity but of credit, particularly with countries such as Brazil and Mexico and, to the extent that the IMF may relieve the strain now borne by the banking system, an increase in the quotas is to be welcomed. I hope that will satisfy the hon. Member for Motherwell and Wishaw.
In practice, there has been no need for an official safety net. The Eurocurrency market has taken the strain remarkably well, but what is now required is for the OPEC countries to take their proper share of the new quotas. A banking system cannot be expected to support the imbalance between the rich and poor countries. As much as 40 per cent. of the European currency business has recently been concerned with either developing non-oil countries or the COMECON countries, whose major demands on the market have been considerable and growing.
No banking system wants to be too involved with persistent debtor countries and it is wrong that it should be. The banking system can decline to get involved, although that ignores the extent of existing commitments to countries with seemingly permanent balance of payments problems. It would be foolish not to take into account the effect of a major failure in the banking system. That is why it is right to enlarge the quotas of the IMF.
That is also why the OPEC countries should take up a share appropriate to their resources. The present position is absurd. Our quota is to go to 2,925 million SDRs, while Iran's will be 660 million, Saudi Arabia's 600 million, and Kuwait's 235 million. Our quota is nearly double that of the three major

oil producers. What can be the sense in that?
It is a far cry from 1945 when we had a quota of $1,300 million compared with quotas for the United States of $2,750 million and France of $450 million. Now we are to have 2,925 million SDRs against the 8,405 million of the United States, France's 1,900 million and West Germany's 2,100 million.
Of course our figure greatly overstates our position relative to France and Germany, let alone to the OPEC countries. It is a reflection of our present weakness that, while there is a general increase of more than 30 per cent., our quota has increased by only 4½ per cent. There should have been a cut in our quota if our real position was to be recognised, but it is just as well that there was no cut, because if there had been, the Government would not have been able to carry out the enormous borrowings which they have inflicted upon the country.
The Government have borrowed so much that it is difficult to keep track of it all. What is the latest score? I make it £6·8 billion since 1st March 1975, but I am sure that the Minister will have the figure at his fingertips.
In December the Chancellor of the Exchequer wrote the second Letter of Intent to the IMF and the Group of 10 had to meet especially to authorise the extra currency required for the standby of 3,360 million SDRs—that is $3·9 billion available over two years. In addition, we have the $500 million swap from the United States Treasury and the $350 million swap from West Germany as well as the $3 billion as a special standby to fund the official sterling balances. Only last week we had a new currency loan of $1·5 billion. No one has said what that is for, but I guess that it must be to allow the private sterling balance holders to withdraw money at will and to have some sort of facility available if they so wish.
There has been a considerable flow of funds into this country in the last few weeks attracted by exceptionally high rates of interest. It is extraordinary that in this period the Government should have been pursuing a policy of overseas aid to Swiss bankers. They have been allowed to withdraw money at any time and have seen here enormous rates of


interest compared with other countries. I do not know how much they have made, but it must be many millions of pounds. It is fitting that in a Bill that deals with international aid and trade we should be discussing international aid to Swiss banks, though this would hardly appear in the Bill's Long Title.

Mr. Viggers: The Government appear to have sold £7,000 million of gilts at an interest rate of about 15 per cent. and then cut the interest rate. Can my hon. Friend comment on the competence of that exercise?

Mr. Hordern: I am afraid that I am not consulted on these matters, so I cannot give my hon. Friend a proper answer. It was as plain as a pikestaff that interest rates in this country would be very attractive after the IMF arrangements were concluded. So it has proved and it has meant that the Government have had to finance at very high rates of interest a substantial flow of funds into this country.
Of course, we made the largest ever single borrowing from the IMF. It is the same with every Labour Government in this country. There is literally no end to it. There is no interest rate that they will not pay. Apparently, there is nothing that they will not sell—even BP.
The Chancellor barges in through the front door borrowing directly, and sends the nationalised industries, the local authorities, and even the water boards, round to the back door. Whenever there is a Labour Government in this country the cry goes out round the world "Bankers of the world unite. We have nothing to lose but our cash." The Government have given a new meaning to the Socialist idea of the outstretched hand of friendship. It is the outstretched palm.
I do not think that developing countries can possibly regard what is going on with much admiration. So much of their debt is interest. When they see vast sums of money being appropriated by Britain, they must wonder how genuine we are in trying to help the Third World. There is a great deal of aid to the Third World. There are ample soft loans.
But soft loans are not confined to the Third World. A considerable part of the trade between the developed countries is carried out by soft loans as well. What

are export credits if they are not soft loans? What are the special credits, such as the one between Russia and Britain, worth £900 million to which my right hon. Friend the Member for Chipping Barnet (Mr. Maudling), my hon Friend the Member for Worthing and others have referred? What is the justification, moral or practical, for giving preferential treatment to Russia rather than to the developing countries?

The Under-Secretary of State for Trade (Mr. Michael Meacher): Give it to them both.

Mr. Hordern: The Minister suggests giving it to both. There is a good reason for it. It is the policy of mutual attraction. The Russians also borrow a great deal of money. They have managed to borrow even more money than we have borrowed on the Euro-currency markets, and that takes some doing.
Under both GATT and IMF rules, import restraints are regarded as contrary to the interests of free trade. But where lies the difference between a tariff barrier on imports and a subsidy on exports? What is the difference between making importers pay a fine for bringing their goods to this country and charging our people more and making them pay a fine for exporting our goods to other countries?
It can be argued that export credits are virtually universal and that we should be foolish not to use what our competitors use. That may be so. But we should exert as much influence as we can to obtain multilateral disarmament in export credits. Otherwise the whole concept of free trade is but a mockery.
We seem to discover new twists and variations of the theme of export credits the whole time—for example, the costescalation system and the system of performance bonds, which have been mentioned, and the clause which deals with the national interest. We shall examine these systems more closely in Committee.
I should like to know how many contracts have been concluded using the cost-escalation system. I think that there have been two. Perhaps the Minister will tell us when he replies to the debate. There was an estimate of £7·8 million for 1977–78 in last year's public expenditure White Paper which was supposed to


tail off to £1 million in the following and £2 million the year after that. How long is that cost-escalation system now supposed to last? What representations have the Government received from the EEC and GATT about it?
I understand that the European Court has decided that export credit terms between European countries are a matter for the Commission. That point was made during the debate. Therefore, what representations have the Government received and how long is this cost-escalation system likely to last? Exporters would like to know.
Exports covered by export credits have soared. They rose last year by nearly 30 per cent. The reason for the export credit part of the Bill is that the level of public expenditure tied up in these credits has become far too large. We have not got detailed estimates for this year, but I believe that the cost to the Exchequer of the interest rates subsidy alone was £400 million. I am glad that the Chief Secretary is present, because he will know exactly what the level was. Perhaps the Minister will tell us what it was.
The estimate in last year's public expenditure White Paper was £337 million for the current year, £394 million for the following year and £454 million for the year after that. That is for the interest charge alone. I believe that I am right in saying that that is only one side of the equation. We must also take into account the cost of the refinancing of the fixed rate export credit. That may amount to a great deal more money. It might represent as much as £500 million.
It is important that the Minister gives us the figures when he replies. We want to know what the cost of export credits has been for 1976–77 and what it is likely to be during the course of 1977–78. I ask these questions because the Bill provides for the most formidable increases in export credit cover.
Schedule 1 indicates that the present sterling limit of £21·2 billion may be increased at once to £25 billion and that that sum may itself be increased by £5 billion three times. That is a total of £40 billion. If a cost of £900 million is being incurred, I should like to know

how much more we shall have to provide on the new limits partly through subsidising the interest rate and partly through subsidising existing credits that have to be refinanced as they fall in. If that is what we are spending now on public sector expenditure, what shall we spend as export credit trade expands? How much more sterling will be involved?
Nobody knows the answer to that question because it depends entirely on the difference between our interest rates and those of other countries. That is the cause of the problem. That is what has helped to make public expenditure accounts so large. I refer to the difference between our long-term interest rates and those that apply in other countries. In the United States the long-term interest rate is now 6·7 per cent. In Germany it is 6·9 per cent., in Japan it is 8·6 per cent. while in the United Kingdom it is 13·1 per cent. My hon. Friend the Member for Mid-Sussex said that there was a gentlemen's agreement about allowing a 7½ per cent. or 8 per cent. rate to be mutually agreed. That is exactly what the average rate of long-term industrial rates is in other countries apart from the United Kingdom.
We must recognise that the cost of our public expenditure is likely to continue so long as the high rates of interest continue. That is another reason for reducing the rate of interest as quickly as possible and not merely thinking of attracting funds from other countries as rapidly as possible. From every point of view it is essential to reduce our interest rates as soon as we can.
Why are we increasing sterling limits if the cost of export credits is scheduled to go down? We were told by the Chancellor in his December statement that there was to be a saving of £100 million in the public expenditure cost of export credits in 1977–78 and £200 million in 1978–79, but nobody is suggesting that the level of support funded by ECGD will decline. No one is suggesting that, yet the public expenditure element is due to decline. Is it suggested that the rate of interest will decline so markedly that the public expenditure element will not be so expensive? I see that the Minister is shaking his head. Indeed, I do not think that that is suggested. I think this is why the new system of the SDR element is in the Bill. Indeed, that must be so.
I turn to a new item in the Bill namely, the terms of the SDRs. There are to be 10 billion SDRs with three separate tranches of 5 billion each. I believe the position is that Treasury consent has to be obtained when each of the tranches of SDR is applied for. When has there ever been such a large contingent liability? Certainly this must be a matter for the Public Accounts Committee to examine.
The potential liability is quite enormous. Last year developing countries other than oil-producing countries took nearly 30 per cent. of our ECGD business. The COMECON countries took 12 per cent. What we are doing is borrowing short and expensively to lend long to countries with existing enormous if not paralysing debt to the tune of some 10 billion SDRs if the new quotas are fully taken up.
Therefore, what we are doing is transferring a potential sterling liability into a potential foreign currency liability of quite stupefying proportions. It is no good saying that it will not happen. We have no idea what will happen in these countries. Many of these contracts, of which many of my hon. Friends have experience, take place over a long period. Some of the turn-key contracts take as long as 10 years. I do not believe that there is any market in operation at present in Eurocurrencies for longer than five years, so that is the only time that can be insured. There is a risk.
Furthermore, financing Eurocurrency loans is much more expensive than financing sterling loans. I believe that the rate of financing Eurocurrency loans is½ per cent. more per annum over the life of the loan. It is much more expensive than the present rate.
It is said that all this is designed to save public expenditure. No one is keener on that than those on the Opposition side of the House, but surely it would have been better to cut other public expenditure and to follow the policy that we have sought to present to the Government of reducing all interest rates. We should not then have had to create these liabilities to anything like the extent to which they appear in the Bill.
I have not so far mentioned the CDC provisions in the Bill. But, I would give them a warm welcome. It is true that

there is a substantial increase in the borrowing limits, from £260 million to £570 million. Many hon. Members must have come across the good work that the CDC does in various parts of the world, as I came across it in Mauritius last summer when I saw the work of the housing corporation there and understood that that was financed by the CDC. That is just the sort of grass roots development that should surely be encouraged in our overseas aid programme, and I am very glad to see how successful it has been. It is quite right, therefore, to write off the old interest loan and the old capital position, which amounts to £26 million altogether, because it has been held in a special account and no one really expected it to remain there for ever. The Chief Secretary came to terms with reality—no one is quicker than he is in doing that—and he struck it off the books.
Yet how does it look when one compares the increased use of sterling for this development and the CDC with forbidding our banks to finance trade between different countries? That is the extraordinary thing. We are allowing much more sterling to be used for the CDC but disallowing it for financing genuine trade between third parties.
As I say, there are too many things in the Bill, and too many things upon which we have to comment, and very many more questions will be put to the Government in Committee. All these matters are important and should have been separately dealt with. However, we look forward to hearing what the Minister has to say on these most important questions about SDRs, the rôle of the IMF and the rôle of gold and many other matters.

9.23 p.m.

The Parliamentary Secretary to the Ministry of Overseas Development (Mr. John Tomlinson): There have been few participants in the debate, but I think that everyone present during the afternoon would agree that we have had a stimulating, very wide-ranging and very informed debate. Never have so many people solicited my views on so many issues before. I say in advance that if there are particular points that I overlook, perhaps that will have been at the end of a speech in which I tried to deal with as many detailed points as possible while


working within the twin constraints of time and my personal capacities on the very wide-ranging comments that have been made.
First, I think it is unfortunate, perhaps, that there has been so much criticism of the fact that the three different aspects of the Bill have been put together. A number of hon. Members have asserted that there ought to have been three separate Bills. I agree entirely with what was said by my hon. Friend the Member for Motherwell and Wishaw (Dr. Bray), that the fact that we have a single Bill demonstrates the interconnectedness of of the particular aspects with which we have been dealing.
It is an unusual Bill, but it recognises the common link, the interrelationship between the economic, the financial and the aid aspects of international trade. The virtues of multilateral aid are made quite clear and are supported by the Bill. Necessary and crucial support for exports is permitted by the Bill, and the Bill's IMF provisions are not only essential for the proper working of the international monetary system but are clearly advantageous to the interests of the United Kingdom. In terms of the exchange of goods and services, we are no longer an island but are an active partner in promoting a more vigorous and prosperous state of world trade.
I shall not dwell—I am sure that the House would not wish it—on the objectives of the various international institutions with which the Bill is concerned. My right hon. Friend the Financial Secretary covered those matters admirably in his opening speech. However, I compliment hon. Members on the relevance of their comments on the important principles underlying the technicalities of the Bill, and I shall deal with as many matters as I can in the limited time available.
The hon. Member for Hertfordshire, South (Mr. Parkinson), in opening for the Opposition, my lion. Friend the Member for Sheffield, Heeley (Mr. Hooley) and the hon. Member for Hitchin (Mr. Stewart) spent a large part of their time on the rôle of the International Monetary Fund. In his opening speech, my right hon. Friend the Financial Secretary drew attention to the enormous growth in

world trade which has occurred since the war, and he pointed to the considerable benefits that the world derives from greater interdependence. But interdependence carries costs, too. In the United Kingdom exports now constitute more than one-fifth of output, and the corollary of this is increased exposure to fluctuations in international demand for the goods which we produce. There has been a similar increase in the proportion of output devoted to trade in all other industrialised countries.
In the early years of this decade, the world experienced one of the effects of this increased interdependence. For reasons which are not yet fully understood, the economic cycles which all countries experience appeared to become synchronised between 1971 and 1975. As we know, this led to a combined surge in world demand, a boom in commodity prices and accelerating inflation. Similarly, following the increase in oil prices, the industrial countries moved into a synchronised slump. I do not pretend that it will be easy entirely to avoid a recurrence of these events, but with increasing interdependence the only route by which the possibility and the consequences may be modified lies in discussion and greater co-ordination of policy.
In the context of the Bill, the implications of the International Monetary Fund also should be stressed. With its regular discussions on the world economic outlook, based on detailed consultations with every member about its economy, the executive board of the Fund and the annual meetings of the board of governors provide occasions for useful discussions on the economic outlook and of member countries' policies, based on detailed and extensive knowledge.
The activities of the Fund in providing finance are important, but I suggest that when hon. Members refer to the IMF as being only a bank they tend to underrate the less tangible contributions made by this and other international organisations.
The hon. Member for Hertfordshire, South went into some detail with his analysis of the IMF and its rôle, and I am sure that all the details of his speech were noted by my right hon. Friend the Financial Secretary. The hon.


Gentleman dealt in particular with the problem of the size of the quota and referred to the reduction in the quota as "marginal". By my calculation, a reduction from 9·58 per cent. to 7·49 per cent. is more than marginal. However, I should say that if the Fund were being set up afresh the United Kingdom would certainly not have so high a proportion.
When the hon. Gentleman went on to some of his criticisms, I felt that we had from him a tired, dreary and worn-out polemic—a note which, happily, was not present in the rest of his speech. In many of his criticisms of Government policy, we had the same worn-out repetitions as we have heard many times before and I felt that he would have done much better if he had maintained the rather more harmonious note introduced in his useful and helpful comments about the ECGD and the Commonwealth Development Corporation.

Mr. Parkinson: I am sorry that the Minister found my remarks rather tired and worn out. I must tell him that many of us do not find it a matter of great pride that Britain is the IMF's biggest debtor, and we do not see it as something to be admired that, at a time when the world is short of liquid resources, Britain is pre-empting a major slice to prop up a standard of living which we are not earning and we are competing with the Third World for scarce resources.

Mr. Tomlinson: Many of us on this side, in company with, I am sure, many hon. Members opposite, find no cause for pride in the monetary profligacy which led to the situation which the present Government inherited in 1974. However, we could pursue this exchange to the detriment of consideration of the Bill, and I say only that the hon. Gentleman's more constructive comments in his otherwise admirable speech struck a far happier note than did his carping and, I thought, uncalled-for criticism.
I turn now to some of the specific questions that the hon. Gentleman put. In particular, he referred to the ability of the ECGD to handle increased levels of business and increasingly complex business. While foreign currency financing is a new departure for the Department, it is closely allied to the techniques developed by ECGD, and, with the intro-

duction of new facilities, the cost escalation scheme and support for exporters in raising performance bonds, for example, show that the Department's staff is able to respond to the challenge. I am confident that the Department will be able to handle the increased business. The ECGD is constantly simplifying its procedures to enable business to be dealt with more quickly.
The hon. Member for Hertfordshire, South raised the problem of reserves being too low for current business and asked what funds we have to improve the reserve ratio. He said that the 3 per cent. reserve target is not being met. But this applies to the Department's Section 1 commercial business. The primary intention of the premium rate increases is to improve this reserve ratio and to make adequate provision for the expected level of claims.
The hon. Member also asked whether we are satisfied with the parliamentary control of Section 2 business of ECGD and asked why there had not been consultation. The comparison that he makes with the Industry Act is misleading. Section 8 of the Industry Act requires parliamentary approval for Government assistance. The ECGD powers are not comparable when dealing with Section 2 because ECGD has the benefit of expert advice from Government Departments and other sources. In accordance with undertakings given to Parliament, separate figures for liability under Sections 1 and 2 are published. The Bill clarifies this position in relation to returns.
I shall now deal with the detailed questions, and because of the time I hope that hon. Members will forgive me if I do not deal with them all. The hon. Member for Hertfordshire, South and others referred to the CDC's share of aid. Perhaps they will be reassured by some detailed figures. The provision is £29 million for the year 1977–78 compared with only £18 million in 1975–76 and £20 million in 1976–77. I am sure hon. Members will agree that those figures fully recognise the need to maintain a momentum.
I turn to the contribution made by the right hon. Member for Chipping Barnet (Mr. Maudling) about trade with the Soviet Union. When dealing with that I shall reply also to the hon. Members for


Worthing (Mr. Higgins), Gosport (Mr. Viggers), Hertfordshire, South, and Dorking (Sir G. Sinclair). It remains Government policy to ensure that United Kingdom exporters can compete for worthwhile export business. We cannot ignore what others are doing. If we did, we should lose business. Are hon. Members suggesting that we should not enable our exporters to meet international competition with adequate credit terms?
My right hon. Friend the Chancellor of the Exchequer has already announced the intention to reduce public expenditure on refinancing sterling export credit, but I am sure that both sides of industry will agree that the balance lies in providing comprehensive competitive facilities that enable exporters to compete for such business, whether in Russia or in other countries.
I can confirm that the Government are aware of the level of Eastern European indebtedness and that the situation is kept under review by us and other Western countries.

Mr. Hordern: That was not quite the point that we made. We sought to draw a distinction between the type of trade financed by the ECGD and the special facility made available by the £900 million credit for Russia. We also asked what rate of interest was being offered to the Russians to buy British goods.

Mr. Tomlinson: As the hon. Gentleman well knows, the rate of interest is the subject of confidential contracts and I am not in a position to give that information.

Mr. Maudling: One takes the point about competition between this country and France and Italy, but our point is whether it is sensible for the West as a whole to give this capital contribution to Russian expansion. If it is not sensible, what are the Government doing about it?

Mr. Tomlinson: The Government's policy follows the competition. Our practice was already being followed by competitor nations.

Mr. Higgins: I am grateful to the Minister for giving way again, because this is a major point. It is all very well following the competition, but is it not possible that that will result in the goods

being exported on terms which do not give us an adequate profit or, probably, any profit? Can the Minister give us the figures for which we asked? What is the total amount of credit now being extended to the COMECON bloc by the ECGD? How much has so far been taken up? The hon. Gentleman says that the Government are aware of the position. Let him tell us.

Mr. Tomlinson: I must ask the hon. Gentleman to put down a Question on the detail. In reply to him and the right hon. Member for Chipping Barnet I repeat that I can confirm both that the Government are aware of the level of Eastern European indebtedness and that the situation is being kept under review by other Western countries.
Several extraordinary comments have been made. For example, the hon. Member for Gosport made the extraordinary statement that trade with the Soviet Union gives it prestige in so far as it is seen that we deal with it and it deals with us. What is the logic of that statement? Surely he is not suggesting that we should not engage in any trade with the Eastern European countries or with the Soviet Union. If he is saying that, I should like him at some time to tell us what that means in terms of detente. If he is not saying that, other hon. Members would appreciate hearing exactly what he is saying.

Mr. Viggers: if the hon. Gentleman had been with the Prime Minister, and the Prime Minister had agreed to meet Mr. Bukovsky, they would both have understood that I was quoting Mr. Bukovsky. That was the point of my remarks.

Mr. Tomlinson: That was not the context in which they were made. If Mr. Bukovsky had accepted the invitation by Foreign Office Ministers to meet them, he would have had a chance to tell us direct rather than second-hand. Many hon. Members are in danger of trying to have it both ways on the question of trade with the Soviet Union. On the one hand hon. Members complain that credit is too cheap. On the other hand hon. Members complain that the credit is not being taken up.
I turn now to the remarks of my right hon. Friend the Member for Lanark


(Mrs. Hart) who asked what projects of the CDC are directed towards the poorest. By far the greatest part—possibly as much as two-thirds of the new commitment over the current five-year period up to 1980—is being directed towards the poorest. My righ hon. Friend also asked about problems concerned with the Export Guarantees Act 1975 which she thought consolidated the measures incorporated in the Overseas Investment and Export Guarantees Act 1972. The problem is slightly more complicated than she suggested. I have drawn her remarks to the attention of my hon. Friend the Under-Secretary of State for Trade, who has taken full note of what she said about the need for a code of practice and her suggestion that this could be included as an extra provision under Clause 4 of the Bill.
My right hon. Friend also asked an important question, echoed by the hon. Member for Mid-Sussex (Mr. Renton), about the development of regional banks and asked for an assurance that there was nothing in the Bill to assist Dr. Kissinger's proposal for an international resources bank. I share the doubts of my right hon. Friend the Member for Lanark about whether the concept of an international resources bank as floated by Dr. Kissinger will be revived by the Carter Administration. We took note of the views of developing countries about a world resources bank at UNCTAD IV. There is probably a good chance that we already have the institutions available to meet the needs of the developing countries, especially through the three bodies of the World Bank—namely, the IBRD, the IDA and the IFC. The Bill contains provisions to allow us to support the work of the World Bank, and these provisions are adequate.

Mr. Tim Renton: Is it not true that the World Bank does not want to take on the work proposed by Dr. Kissinger for an international resources bank because it feels that it is already over-extended and too involved in the less-developed countries? That is why it gives support to the idea that if another institution were developed it should not be under the aegis of the World Bank.

Mr. Tomlinson: I have no basis for confirming the hon. Gentleman's view.

Mrs. Hart: Can my hon. Friend confirm what the hon. Member has said, that the World Bank would not have been ready to support the Kissinger proposals for an international resources bank?

Mr. Tomlinson: That is what I was saying, that I have no basis for confirming what the hon. Member has said.
The right hon. Member for Chipping Barnet raised the question of surplus capacity aid and invited me to comment on what had happened to that concept. I am familiar with the general aim of the right hon. Member's suggestion and in principle I am sympathetic to it. I agree that it would overcome part of the problems we face in increasing our overseas aid. But the overriding constraint imposed by the undesirability of adding to public expenditure and to the public sector borrowing requirement still remains.
The right hon. Member for Chipping Barnet also dealt with performance bonds. I assure him that ECGD is playing an active part in negotiations to provide performance bonds for British exporters. This has taken the form not only of the ECGD's new bond facility but the extension of its basic insurance cover against the unfair calling of bonds. Discussions on these special problems are continuing, with the Government taking an active part in them.
My hon. Friend the Member for Motherwell and Wishaw made an interesting speech on many detailed technical points, to which the Financial Secretary and I listened with interest. He raised in particular the question of the IMF buffer stock facility. He asked about the availability of finance under the buffer stock facility to help with the financing of commodity agreements. In general, there should be no problems about the use of this facility. So far it has not been much used, but that is because at present there is only one buffer stock—tin—in existence. If and when new buffer stocks are agreed to, IMF members would be able to draw on the buffer stock facility to finance their contributions to the agreements. Such drawings would not affect their right to draw down other fund facilities because they would in practice be disregarded in calculating the overall amounts they could draw.

Dr. Bray: This marks a significant development. So they will not be calculated for general drawing rights?

Mr. Tomlinson: I am advised that such drawings would not affect members' rights to draw under other fund facilities because in practice they would not be calculated in the overall amount.
The hon. Member for Gosport raised the question of foreign currency buyer credits which had to be carried out by foreign banks. He suggested that our banks would therefore lose business. That is not so. Our banks can provide foreign currency to finance buyer credits. The ECGD has been in detailed touch with British banks, which have made clear that they hope to be able to play a full and active part in the new arrangements.
The hon. Gentleman made some play of his concept of the national interest when talking about the national interest Section 2 commitments. Listening to someone being as cynical and sceptical about the national interest as he was, I recalled past legislation. For example, in the Industrial Relations Act code of practice the national interest was placed firmly as the criterion against which everything should be judged. I am glad now to see a healthy scepticism in the hon. Gentleman about that sort of concept, even if that scepticism was not there in 1972.
The hon. Gentleman asked whether the ECGD should have two separate limits. It was explained during the passage of the 1975 Act that separate figures for Section 1 and Section 2 liabilities would be maintained and published. That has been done. The Bill formalises the position.

Mr. Hordern: These new Eurocurrency arrangements must take up a considerable part of ECGD business. What proportion does the hon. Gentleman expect them to cover, since the Treasury is looking for reductions in public expenditure on sterling ECGD limits? What proportion will now be acceptable in the new Eurocurrency loan?

Mr. Tomlinson: I cannot give an estimate. It is too early to say.
The only speech I was unable to hear, unfortunately, was that of my hon. Friend the Member for Mitcham and Morden (Mr. Douglas-Mann), but I understand

that it was admirable. He dealt with the need for a world programme of birth control and spoke passionately, I understand, in support of the overseas aid programme. I look forward with interest to reading his speech in Hansard.
The hon. Member for Dorking raised the question of the World Commodity Centre in London. Ministers were agreed that, though they were sympathetic to the aims of the promoters, public expenditure would not allow the Government to support the project financially in the current economic climate. Having said that, however, I welcome and share the warm words he spoke about the work of the voluntary aid agencies.
My hon. Friend the Member for Sheffield, Heeley raised the question of the cost escalation clauses, as did the hon. Member for Horsham and Crawley (Mr. Hordern). My right hon. Friend the Chancellor of the Exchequer announced on 15th December that cost escalation cover would be renewed for a further year from March, subject to the approval of the House of Commons. The necessary order will be laid in the near future, and some improvements have been made to the scheme, since it was first introduced in order to meet some of the points that have been made by industry.
The hon. Member for Hitchin asked a number of detailed questions, to two of which I would like to respond. The hon. Gentleman asked about the position of the timing of the ECGD's foreign currency facility. The introduction of new cover from ECGD in support of export contracts in foreign currencies was announced by the Secretary of State for Trade on 4th August. It was explained that for buyer credit arrangements a temporary arrangement had been set up involving the Exchange Equalisation Account which would be used until ECGD had new powers relating to commitments in foreign currency. The powers are set out in the Bill. While no such guarantees have been issued by ECGD, the reference in Clause 4(2) is designed to cover the period between 1st January this year and the date on which the Bill passes into law.
The other particular question that the hon. Gentleman raised was the important one of the Bill providing for special drawing right limits being exceeded during the


period of operation. This matter will no doubt be examined in detail in Committee, but I note that, if exporters are to be given the protection they need, once foreign currency commitments have been taken on there is no way of preventing quarterly revaluations resulting in their SDR equivalents exceeding the SDR limits.
The provisions permitting the limit to be exceeded ensure that in these circumstances existing commitments are not affected and that ECGD would not be prevented from fulfilling undertakings given at the time to provide when there was room in the limits. Only in exceptional circumstances would the limit be exceeded. The ECGD would aim to take account of likely changes to keep commitments within the SDR limit.
The hon. Member for Carshalton (Mr. Forman) raised the question of export credits now being within the province of the Commission. I would say to him that export credit and related official support are provided by institutions in the member States and will continue to be administered on a day-to-day basis by national authorities. The Commission can put forward proposals for regularising the principles and practices governing export credit, but any Commission initiative is subject to the control of the Council and, therefore, to the Treaty's voting provisions.
I turn briefly to the hon. Member for Worthing, who asked a number of detailed and specific questions. The hon. Gentleman raised the need to control export credit competition, to which I have partly referred. The Government accept the desirability of rationalising competition on the terms of export credit competition. It is for this reason that we play an active part in international negotiations to achieve agreement. These discussions bore some fruit last year with the consensus which agreed guidelines for maximum credit lengths, minimum interest rates and down payments. The Government hope to see further progress in this area.
With regard to ECGD premium rates, clearly my right hon. Friend's opening speech could not cover all aspects of ECGD but he has informed the House that premium rates are to be increased. The increases are necessary to make

adequate provision for expected future claims and to move to restore the ECGD reserve position to which I have already referred. The Committee stage will no doubt give all hon. Members the opportunity to discuss any issues which arise from these changes.
The other problem with which I should like to deal concerns exchange rates surveillance. The principles and procedures on surveillance are a matter of continuing pragmatic discussion within the IMF. The main procedure will, as at present, be through the regular annual consultations which the Fund holds with member countries on the state of their economies generally.
From that, the hon. Gentleman went on to ask about exchange rates. He asked what Government policy was. All I can say is that our general aim is set out in the Letter of Intent to the IMF and that it is to minimise disruptive short-term fluctuations consistently with maintaining our competitive position.
The hon. Member for Mid-Sussex asked about common fund negotiations. Because of the constraints of time, I am afraid that this is the only question of his on which I can promise a specific reply. The United Kingdom is playing an active and constructive part in the international meetings in preparation for the forthcoming conference on a common fund. I am sure that the hon. Gentleman is not surprised that that is my answer, even though he may have been looking for one which went somewhat further.
The hon. Member for Horsham and Crawley asked specifically about the restitution of one-sixth of the Fund's gold to members in proportion to their quotas. We shall be buying back our share of the Fund's gold at the official price of $42 per fine ounce. The first instalment has just been returned to us. At the official gold price, it is worth some $24 million.
Finally, perhaps I might say a few words about the work of the Commonwealth Development Corporation, which has received extensive praise from hon. Members in every part of the House. It is of special interest to my Department. In this connection, I want to quote some remarks by the Opposition spokesman on the last occasion when we discussed CDC borrowing limits. The then hon. Member for City of London and


Westminster, South, Mr. Tugendhat, said that the CDC showed clearly how effective an aid programme could be for a country such as Britain with limited resources, how quite small sums of money could go a very long way, and how the fulfilment of very small and specific tasks which enabled much bigger projects to take place could have a profound effect on the infrastructure of the areas in which it was operating. I am sure that those are words which every hon. Member will echo, especially those who have taken the opportunity to read the annual report of the CDC.
Although we may not agree on many other matters, fortunately there is a substantial measure of agreement on both sides of the House about the effectiveness and value of the work of the CDC in the developing world. I applaud the fact that CDC investment is providing employment in many underdeveloped areas on an extensive scale and that it is growing the food and developing the resources that are in such demand.
I congratulate the chairman, Sir Eric Griffith-Jones, who is currently in South-East Asia visiting Corporation projects there, the Board of the CDC and all the staff at home and abroad on their determination to extend the CDC's activities in the development of renewable natural resources.
On that harmonious note of universal praise for the CDC, I am sure that I command support in commending the Bill to the House.

Question put and agreed to.

Bill accordingly read a Second time.

Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).

Orders of the Day — INTERNATIONAL FINANCE, TRADE AND AID [MONEY]

Queen's Recommendation having been signified—

Resolved,
That, for the purposes of any Act of the present Session (hereinafter referred to as `the new Act') to make provision for the payment of further subscriptions to the International Monetary Fund and for raising the limit on loans under the International Monetary Fund Act 1962, to enable effect to be given to certain amendments of the Articles of Agreement of that Fund, to amend the Export Guarantees Act 1975, to make further provision about the finances of the Commonwealth Development Corporation and to amend section 2 of the Overseas Aid Act 1968, it is expedient to authorise—

(a) any increase in the sums payable out of moneys provided by Parliament under section 10(3) of the National Loans Act 1968 which is attributable to provisions of the new Act increasing to not more than £550 million the aggregate amount which may be outstanding at any time in respect of advances made to the Commonwealth Development Corporation by the Minister of Overseas Development;
(b) any increase in the sums payable out of moneys provided by Parliament under section 2 of the Overseas Aid Act 1968 which is attributable to provisions of the new Act extending the scope of that section so as to cover—

(i) international development banks which are not wholly of a regional character, and
(ii) all types of payments which fall to be made to such banks in pursuance of arrangements by which Her Majesty's Government in the United Kingdom becomes bound;

(c) any increase in the sums payable out of moneys provided by Parliament under the Export Guarantees Act 1975 which is attributable to provisions of the new Act relating to limits set on the financial commitments of the Secretary of State under the Export Guarantees Act 1975;
(d) with respect to sums debited to the Commonwealth Development Corporation's deferred liability account, the remission by the Minister of Overseas Development of the payment by the Corporation—

(i) of all sums outstanding in respect of advances made to defray capital expenditure, and
(ii) of such sums as that Minister may from time to time deem to be appropriate in respect of accumulated interest; and

(e) any increase attributable to the new Act in the sums charged on, or payable into or out of, the Consolidated Fund or the National Loans Fund.—[Mr. Robert Stoddart.]

Orders of the Day — EUROPEAN COMMUNITY (SKIMMED MILK)

9.59 p.m.

The Minister of State, Ministry of Agriculture, Fisheries and Food (Mr. E. S. Bishop): I beg to move,
That this House takes note of Commission Document No. R/70/77 on Skimmed Milk and Skimmed Milk Products.

Mr. Speaker: I have selected the amendment in the name of the hon. Member for Renfrewshire, West (Mr. Buchan), at end add:
'but regrets that such disposal arrangements are necessary; recognises the need to secure adjustments to the price support arrangements in order to achieve a better balance of the market in the milk sector; and arges the need to take further steps to avoid the creation of structural surpluses'.

Mr. Bishop: I should like first of all to express our appreciation of the efforts of the Scrutiny Committee, which has once again brought an important proposal from the Commission of the EEC to our notice as needing further consideration by the House.
The subject of our debate tonight is EEC Document No. R/70/77 on the granting of aid for skimmed milk and skimmed milk powder used in animal feed. This is a draft Council regulation which would amend the basic regulation relating to skimmed milk and powder in various ways. It is still being considered by officials and technical experts in Council working groups and will come before the Council of Ministers in due course, possibly next month. It is, therefore, extremely useful to hear the views of the House in good time before decisions are taken on this matter. At this stage I should say that I accept the amendment in the name of my hon. Friend the Member for Renfrewshire, West (Mr. Buchanan).
Hon. Members will readily appreciate that we are dealing here with a technical subject but also one that has interested the House a great deal in recent months. It may, therefore, be convenient if I first explain some of the background to this measure and relate it to other skimmed milk powder schemes before going on to

consider the Commission's proposal itself. One needs to keep this in perspective.
General rules for granting aid for skimmed milk and skimmed milk powder used in animal feed were laid down as long ago as 1968. Since then skimmed milk powder has been subsidised, but despite this there was a rapid build up in stocks of intervention powder in 1975. This led to the adoption early last year of the compulsory incorporation scheme, a measure which none of us liked and which, the House will be pleased to know, is now being wound up—indeed, the compulsory deposits charged on proteins came to an end last October. Although substantial quantities of powder—about 390,000 tonnes—have been denatured and used in feeds under the compulsory scheme, Community stocks still amounted to over one million tonnes at the end of last year. Last November we had the Commission's proposal—which we debated in the House on 17th December—to write down by 30 per cent. the value of old stocks, in recognition of the fact that they could not hope to command the same price as younger stocks and would probably have to be sold for animal feed.
Stocks are still very large. At present they total 1,048,000 tonnes. There is little or no chance of being able to dispose of this in the normal markets for human consumption and calf feed. They far exceed what it is practicable to distribute as food aid. The only new and substantial markets now remaining are for pig and poultry feed. Unless the Community tries to compel compounders to use it—and I know that the House would not want a repetition of that—its price must be brought down to that of competing proteins, such as soya meal and fish meal. Compounders can then decide whether to use it, in preference to other proteins, on a voluntary basis.
The Commission has, therefore, come forward with two parallel measures. First, it has proposed a scheme under which powder held in intervention stores can be subsidised down to the price of competing proteins. The Commission already has powers to do this under Regulation 1285/70 of the Council, and this proposal is now being considered in Commission working groups and in consultation with the technical experts.
Secondly, the Commission has come forward with the proposal which is the subject of our debate tonight. This proposal would have the effect of diverting greater quantities of liquid skim and fresh powder into pig and poultry feed, and would avoid seeing these products being sold first into intervention before being used later for animal feed. The new proposals deal with a highly technical subject, and while I shall describe the main features of the arrangements I shall avoid going too far into the technicalities.
As I have indicated, R/70/77 would amend the basic regulation relating to the subsidising of skimmed milk and skimmed milk powder—Council Regulation 986/68. This regulation defines the products, the conditions for the granting of subsidy and the factors to be taken into account in deciding the bracket within which actual rates of subsidy are to be fixed. The precise level of subsidy is fixed each year, after the Community price review, within the bracket decided by the Council.
The proposals that we are now discussing would amend those basic arrangements in the following ways. First, provision would be made to subsidise concentrated or what might be termed semidried liquid skim, a product which is not covered by the existing arrangements. Secondly, the proposals would provide for the payment of higher rates of aid on liquid skim fed to pigs under a contract of supply, and also on liquid skim and skimmed milk powder used in pig and poultry feeds. These rates of subsidy would be higher compared with rates of subsidy normally paid on skimmed milk and powder used, for example, in calf feeds.
Thirdly, the proposals would allow the Commission to maintain, beyond the end of the current milk marketing year, a minimum incorporation rate of skimmed powder in calf feeding stuffs as a condition of the granting of subsidy. Finally, they would allow the Commission to set a maximum moisture content for skimmed milk powder subsidised for animal feed.
The central objective of the proposals is to increase the use of skimmed milk and skimmed milk powder. The sub-sidising of concentrated liquid skim would enable savings to be made in the cost

of transport; and the inclusion in the subsidy provisions of liquid skim, sold direct from creameries to pig farmers under a contract of supply, would save the cost of drying. Both these measures are designed to reduce the quantity of skimmed milk which is turned into milk powder and subsequently offered into intervention stores.
In the case of milk powder itself, by continuing minimum rates for incorporation of skimmed powder in calf feeds the intention is to sustain the higher level of usage which has occurred this year. The aid for skimmed powder fed to pigs and poultry would be paid on fresh powder, and this would enable our own pig and poultry farmers to make use of our own domestically-produced powder. These arrangements will also help to keep down intervention stocks by increasing the amount of new production which goes straight into the animal feed market.
The cost to Community funds of these schemes will depend on the level of uptake and the exact rates of subsidy which are fixed. However, the Commission has estimated, based on an annual Community usage of 3 million tonnes of liquid skim and 150,000 tonnes of skimmed milk powder, that the cost would be some 235 million units of account in 1977 and 285 million units of account in each of the three succeeding years. We should be expected to make our contribution to this cost, but this should be balanced in large measure by our receipts—namely, the subsidies on our own milk powder—and by lower imports of other protein feeds. This naturally follows.
Let me now deal with our attitude to the proposals. Against the back-ground of the very large stocks of skimmed milk powder in the Community and the general surplus in the milk sector, steps had to be taken to increase consumption of these products in animal feeds to prevent their simply being added to the stockpile. It would have been preferable had the surplus problem been dealt with some years ago, but the surplus now exists and steps must be taken to deal with it. In view of that factor, the measures that we are debating tonight are reasonable.

Mr. Douglas Jay: Will my hon. Friend make clear that no pig or poultry producer will be compelled in any way to use this skimmed


milk powder but may do so if he wishes, in which case he gets the subsidy?

Mr. Bishop: Yes. That is an important point. The element of compulsion which was a feature of the previous scheme is not included in this scheme.
The measures will help to prevent the build-up of stocks and will also enable the products to be made available to users within the Community itself. Also, the scheme avoids the element of compulsion, which was such an objectionable feature of the scheme which is now in process of being wound up.
I come now to the amendment which appears on the Order Paper in the name of my hon. Friend the Member for Renfrewshire, West. The Government readily accept the amendment. We fully share my hon. Friend's view of the circumstances which have given rise to this measure. We wish to see an end to the continued creation of unwanted and costly surpluses. That is why we shall continue to support sensible moves designed to bring the Community milk market into better balance. These do not, as my right hon. Friend explained fully in the October debate on the Commission's action programme, include such measures as taxes on vegetable oils or total bans on investment aids to dairy farmers. They do, however, include the need for effective action to contain the level of milk prices in the Community.
I emphasise the point that I have made on other occasions: that the Government believe that the job of the Community is to ensure that milk and other commodities are produced by those who are most efficient in their production, and that those producers should be encouraged while the less efficient should be discouraged.
With those comments, I recommend the House to accept the amendment.

10.12 p.m.

Mr. James Scott-Hopkins: It is always rather depressing to come back to a subject which has been debated on more than one occasion—in fact, many times—and to hear from the Minister that the situation is almost as bad now as when we first debated it. The skimmed milk mountain is still there, and it does not appear that much is being done to dispose of it. The scheme for

the compulsory inclusion of skimmed milk in compound feeds disposed of a certain amount—450,000 tons. Nevertheless the quantity has increased, and even the writing-down by 30 per cent. of old stocks has not had the effect of reducing stocks greatly.
There is no doubt that the scheme that we are now debating, although it will increase the attractiveness of using skimmed milk in liquid or dried form, will not reduce the existing stocks that are now multiplying within the Community. Drastic action must be taken to dispose of the existing stocks, which in present circumstances cannot be put on the world market because there are no buyers. Even with a 30 per cent. write-down, they are unattractive and are unwanted. Surely the best thing we could do would be to write the stock off and dump it, figuratively speaking, in the sea or dispose of it by any means. The stock will go on increasing unless strict measures are taken. This enormous amount of dried milk, particularly the older stock, has a depressing effect on the market.
The reason for the ever-increasing level, as I was glad to hear the Minister say, is that there are many farmers in Europe, but not in this country, who are producing milk but should not be doing so because they are inefficient producers. It is about time that the Council took action on this. I have had the honour of serving in the European Parliament, and I know that many proposals have been put to the Commission for dealing with uneconomic milk producers, yet the Council has always shied away from taking the required action.
I hope that following the Minister's remarks only the most efficient producers will be encouraged to produce milk and that the inefficient and uneconomic producers will be discouraged. If it was made no longer worthwhile for an inefficient producer to produce purely for the intervention price, that would be one way of getting on top of the situation.
Of course, it is true that this is a voluntary measure and that there will be no compulsion upon pig or poultry producers or upon anybody else to use liquid or dried skimmed milk in their compounds. It is an effort by the Commission to make it more attractive and put it on an equal footing with soya and


other protein feeds as an equally attractive additive to compounds. I am pleased that the proposal advocates something for which we have been pressing for some time—to make it easier for liquid skimmed milk to be supplied direct to the pig farmer. In this case there is no need for energy to be used to dry the milk, and if it is attractive to pig farmers to have liquid milk delivered direct at reasonable cost this must be done.
It seems that one can obtain this liquid skim only on contract, and it is difficult but vital to get a contract. I hope that the Minister will explain what the terms of the contracts will be, for how long they will last and what difficulties pig producers are likely to face in getting skimmed milk direct from the suppliers on contract.
The level of the subsidy and its cost are a reasonably good bargain for us, bearing in mind the total subsidy proposed by the Commission and the fact that there will be a clawback for us.
I hope that my hon. Friends will agree that the proposals are acceptable. They will not have a revolutionary effect on the unhappy state of the skimmed milk market. Something drastic must be done to get rid of excess old stocks. They must be disposed of at almost any cost because they are hanging over the market. Measures must be taken to stop the increasing size of the skimmed milk mountain, and this means removing the incentive for inefficient farmers to continue producing milk at their present level for intervention. There must also be subsidies to encourage farmers and compounders to use increased supplies of skimmed milk as opposed to other compounds such as soya.
I hope that the House will accept the proposals, which will go a small way to keep the level of skimmed milk, both liquid and dried, under control throughout the Community.

10.18 p.m.

Mr. Norman Buchan: I beg to move, at the end of the Question, to add:
'but regrets that such disposal arrangements are necessary; recognises the need to secure adjustments to the price support arrangements in order to achieve a better balance of the market in the milk sector; and urges the

need to take further steps to avoid the creation of structural surpluses'.
A number of hon. Members will share my view that there is a feeling of déjàvu in these discussions. There used to be a tendency to say "We are all Socialists now." Now it seem that "We are all anti-Community now." The arguments of the original opponents of the common agricultural policy are now being adduced with great solemnity by both Front Benches.
I welcome the hardening of the criticism of the policy, both implicit and explicit, here and in Brussels, and in particular by our agriculture spokesman in Brussels. By no means the least reason for the amendment is to strengthen the hand of our negotiators in Brussels. Here is a good example of some of the rarer lunacies of the common agricultural policy.
The hon. Member for Derbyshire, West (Mr. Scott-Hopkins) said that the problem was how to cope with supplies. That is not the problem. The problem is how to get some sanity into what is, even after these measures—indeed, I shall show that they exacerbate the situation—the continual creation of structural surpluses.
The hon. Gentleman, in a curious gospel of despair, suggested that we should parcel up the whole of the surplus and dump it in the sea as a means of getting rid of it. We, who were accused of exaggerating the lunacies of the CAP, are now being told that a possible solution is to drop this surplus in the sea.
I grew up in the 1930s. I remember talk about the destruction of food and so on because of the inability of the world to organise its supplies and purchases. Yet we are writing that into an institution to which this House has given its imprimatur. I do not know whether that is official Conservative policy. I hope that it is not. No doubt we shall hear more of that before the day is out.
We welcome the dropping of compulsion. The policy was "We think that this is nonsense. We know that you can find better and cheaper food additives, such as soya and other imported proteins, which it would be sane to use, but we shall compel you to use a proportion of the surplus skimmed milk powder because we have not worked out a means of using


it." At least that aspect has been dropped. Welcome as the proposals are in so far as they drop the element of compulsion and recognise the lunacy of the continual surplus—the 1 million tons—they can hardly be said to be a great step forward in dealing with the major problem. Indeed, they may exacerbate it.
Looking at the documents relating to this matter, one sees that the Explanatory Memorandum points out that we shall permit
the payment of higher rates of aid than at present permitted under the Regulation on liquid skim fed to pigs under a contract of supply".
If there are to be higher rates of aid, two things will happen. First, it will cost us more in running the market. Secondly, far from being a disincentive, it must inevitably act as an incentive to the creation of structural surpluses. Therefore, the last phrase in our amendment is absolutely necessary. We require to take steps to prevent such surpluses building up.
This proposal will undoubtedly dispose of some of the mountain, because farmers will be highly paid to use it, but it appears to be an inducement to create even further surpluses in future. We have not grappled with that problem. It is that problem and this analysis of it that we want the House to endorse tonight.

Mr. Nicholas Winterton: Did not the hon. Gentleman listen to the speech made by my hon. Friend the Member for Derbyshire, West (Mr. Scott-Hopkins)? My hon. Friend said that Europe must provide a disincentive for the smaller uneconomic dairy farmer and that that person should be encouraged to go out of business. Is not that the way to produce the situation that the hon. Gentleman is trying to achieve?

Mr. Buchan: Yes. That is what we have been arguing about for a very long time—before we entered the Market, while we were in the process of being dragged in, and ever since. I welcome that kind of statement. It is rather better than the suggestion of creating surpluses and dumping them in the sea. To that extent I welcome it.
The regulation states:
Whereas there are large intervention stocks of skimmed milk powder in the Community; whereas, because of the high costs resulting from prolonged public storage, it is

necessary to take special measures to facilitate the use of surplus skimmed milk for purposes other than the manufacture of skimmed milk powder",
it is intended to give a grant for
the maximum use of liquid skimmed milk as feed".
That of itself is not designed to avoid the creation of surpluses. It is not to avoid the high cost which has been resulting from prolonged storage. That is the first argument for dealing with the existing mountain that is being expensively and uselessly maintained but has the consequence of perpetuating and exacerbating the structure.
We are frequently told about the benefit that we have gained from being in the Common Market. It is said that our food prices are subsidised each day to the extent of between £1 million and £1½ million. I question that strongly. First, food costs are high precisely because we are in the Common Market. Although the price of food is being subsidised, the consumption of that which should not have been produced in the first place is adding to the cost. We must weigh the advantage of food prices as a result of the so-called subsidy with the cost of the CAP, which is about 200 million units of account.
Perhaps the most effective way of coming to a balance is to read the EEC budget for 1977. We see that the social policy receives 6·64 per cent. of the budget. Regional policy receives 5·2 per cent. Research, energy, industry and transport policy receives 3·42 per cent. Development policy receives 2·8 per cent., while 64·42 per cent. is being spent on the common agricultural policy. Ten times as much is being spent on the CAP as on social policy. Twelve times as much is being spent on the CAP as on regional policy—we all remember how much we used to hear about that—and 20 times as much is being spent on the CAP as on research, energy, industry and transport policy. No less than 23 times as much is being spent on the CAP as on development policy. That is the proportion of the cost against which we must weigh the so-called support for our food prices. Instead of this policy being a great benefit to us, it seems rapidly to be becoming an intolerable incubus.

Mr. Scott-Hopkins: Does the hon. Gentleman realise that included in the


percentage he has quoted that is spent on the CAP from the EEC budget is the cost of monetary compensatory amounts, which is running at £2 million a day and represents a subsidy towards our food costs? Does he realise that that element is included in the percentage he has quoted?

Mr. Buchan: Yes, of course. But let us not forget that that is only of apparent benefit. It must be set against the cost that had to be met in the first place by being in the EEC, especially the import levies that pushed up the price of cheaper food imports. If the hon. Gentleman does the whole sum, he will see the point.
Secondly, we are not the only beneficiaries. The West German farmer will also benefit. Another matter that has to be considered is what is to happen if this does not work. "Agra Europe" states:
Apart from the transport difficulties mentioned last week processing the paste"—
that is, the semi-liquid skin—
could pose some problems. The West German ministry of agriculture for one is placing no great hopes on the marketing possibilities for condensed skimmed milk.
That was "Agra Europe" on 28th January.
What happens if this scheme does not work? Where do we move to from here? We believe, as we say in our amendment, in moving towards an intelligent pricing policy. We believe that we should be encouraging the efficient as opposed to the inefficient. Above all, we must have adequate protection for our own dairy industry.
If the scheme fails, if compulsion does not succeed and if the new financial inducement does not succeed—the West Germans are saying that it is unlikely to succeed—where does the Market go?

Mr. Geraint Howells: The hon. Gentleman is making an interesting speech. Does he agree that during the past three years we have found it difficult in Britain to persuade ourselves that our method of marketing is years in front of that of our counterparts? Does he agree that we should try to sell to our counterparts in Europe our method of marketing—namely, the Milk Marketing Board, which has served the industry well over

the past 30 years to 40 years without any surpluses of skimmed milk?

Mr. Buchan: I thank the hon. Gentleman. As often happens in this place, an intervention makes the point to which the hon. Member who is speaking is about to come.
What I am posing is this. If compulsion does not work and if the suggested additional incentives do not work, what then? We know what it should be in relation to Britain—that the British dairy industry must be defended and expanded. We can expand efficiently. "Food from Our Own Resources" spells that out. There is a necessity for that because we could then, among other things, lower our imports of processed milk in the form of cheese and butter. There is an absolute case for that in relation to Britain's economy and for such expansion in relation to the British dairy industry. But what if the other method has failed and the EEC does not face up to taking on board the kind of policy that we have been operating?
That raises also the necessity to defend the Milk Marketing Board and its tradiditional role, because, just as it has been under attack and criticism for the nature of its work in acting as a balance between consumer and producer, its dealing with both the producer price and the retail price is now coming under question.
I hope we shall have a guarantee that as part of the amendment, which has now been accepted by the Government, it is recognised that a necessary corollary, to avoid the creation of structural surpluses, is first, for Britain, the defence of our dairy industry and the prevention of any quotas of any kind towards compulsory cut-back in the efficient sectors of our industry, and the defence of the Milk Marketing Board and its traditional rôle. All these things are implicit in our amendment, which I am glad that the Government have accepted.

Mr. Deputy Speaker (Sir Myer Galpern): The Question is, That the amendment be made.
As many as are of that opinon say "Aye".

Hon. Members: Aye.

Mr. Peter Mills: rose—

Mr. Deputy Speaker: Mr. Mills.

10.33 p.m.

Mr. Mills: You gave me quite a shock then, Mr. Deputy Speaker.

Mr. Deputy Speaker: I thought that the House had agreed to accept the amendment.

Mr. Mills: With respect, Mr. Deputy Speaker, that is not so at all. There is some opposition to it.
We in the Select Committee on European Secondary Legislation had no hesitation in bringing before the House again the problem of skimmed milk powder. To say the least, I am highly critical of what is going on, and I do not think that this helps one little bit—although it may help in a very limited way, and marginally.
My hon. Friend the Member for Derbyshire, West (Mr. Scott-Hopkins) says that it is depressing. It is far worse than depressing. It is deplorable that the Community had not had the courage to deal with this problem. It is still tinkering with it. It is very sad that we should be having more and more of these tinkering methods of dealing with the problem.
It is important to reiterate the fact that this problem is not the making of United Kingdom farmers and that we have not need to put our house in order. We spend money on selling our milk and marketing it in the proper way. We have the discipline that is necessary on farms. It is sad that the Community is not prepared to take the sort of steps that we have taken in Britain.
The instrument contains further measures designed by the Commission to reduce the skimmed milk powder mountain. I am absolutely sure that this is the wrong way of dealing with this problem. What is needed is courage in the Community to deal with the problem once and for all. With great respect to my hon. Friend, I do not believe that it is useful to dump this powder into the sea.
We are not getting to the root of the problem. Farmers go on producing milk for intervention. They are producing milk without any responsibility for marketing and they still receive the intervention price. That is not good enough. It is not the fault of the British farmer. If

the milk were tipped away these farmers would continue to produce for intervention. That point must be made clearly.
We must have a policy of co-responsibility. British farmers are prepared to accept that, because they have always accepted responsibility. There should be a lower intervention price for people who are producing only for intervention. When will the Commission and Europe take the bull by the horns and deal with the problem? If they do not we shall have such measures as this, which merely tinker with the problem.
I am not against intervention if it is used to store seasonal surpluses, such as butter and grain, and possibly meat. That is good housekeeping. But this is not. This is a permanent feature which must be dealt with. I want to see Ministers take a stronger attitude. The system is crazy, because subsidies are being paid to produce milk and further subsidies are being paid to get rid of the surpluses. There could not be a crazier situation. It is therefore important that the House should say "No". At the same time, it must realise that intervention in itself is not a bad system. Some hon. Members have said it is bad, but it is not. Only this type of intervention is bad.

Mr. Buchan: I hesitate to interrupt the hon. Member in his excellent speech, but our objection to intervention is exactly on the lines that he describes. Of course, no one is opposed to an intelligent stockpiling policy, but we object to food being produced for surplus.

Mr. Mills: My pairing partner may speak for himself, but other hon. Members condemn any intervention out of hand. That is wrong. We are seeing an abuse of intervention and it is time we spoke more strongly.
The Minister has said nothing about concentrated or semi-dried liquid skim. I have never heard of that being produced in this country. Will it apply here? Will British farmers have the advantage of this scheme? I doubt it. If the country and the Community were sensible they would put pig units near to the dairies, so that skimmed milk could be pumped to them. That is the way in which subsidies should be spent—on capital projects such as that.
Many British farmers will not be caught again. They have experienced all this before. They have been allowed


to have skimmed milk when there has been a certain amount of it available, then just when they have geared themselves up for it, and have spent capital on it, it has been turned off, and no more supply is available. I do not think that the regulation will be much use to British farmers. What does the Minister think? Can British farmers have any confidence in the proposals?
The cost worries me considerably, too. I do not like to think of pouring good money down the drain. The money that will be spent on subsidies should be used for the right purpose, which is to help encourage a great reduction in the number of cows owned by many small farmers and create alternative employment for those farmers, who at present must go on producing the milk because they have no other livelihood. That would be a much better way for the Community to spend its money.
Why not use the money to set up what is really needed in Europe, which is a European Milk Marketing Board? It is about time the Commission got down to brass tacks. The trouble is that it lacks the courage. This is a sad state of affairs.
I am highly critical of the regulation. I have a brief which speaks of the intractable problems of the Community's dairy sector. They are not intractable. There are solutions if the Commission is prepared to take the bull by the horns.

10.42 p.m.

Mr Nigel Spearing: Not only do we face a grotesque situation; we are having a grotesque debate. We have spent longer in the past year talking about milk products than about Britain's transport problems. Because we are in the EEC, we are reduced to talking about the technicalities of pig swill for several hours in one Session.
There has been talk of costs and prices. In recent answers to Questions I have gathered some basic figures on the basis of which I have done some calculations. I understand that the current common agricultural policy price for butter is 86p a pound. We in this country pay about 53p. For imported butter, 65p of the 86p represents a levy. I understand that the world price is between 20p and 25p.

There is a serious imbalance between world prices and CAP prices, the sort of prices which lead to the surplus skimmed milk.
The hon. Member for Derbyshire, West (Mr. Scott-Hopkins) referred to dumping in the sea. We have now reached the reductio ad absurdum which some of us warned Conservative Members about in 1972 and before. I am sorry that they did not take our word or go into the CAP in as much detail as some of us did.
My hon. Friend the Minister also said something grotesque—that we must subsidise the milk skim in order to bring it down to the price of its competing alternatives, such as fish meal. I suppose that the fish meal is derived from some of the trawler Hoovering operations now going on in our great pool of sovereignty around our coasts. I do not think that it is as renewable a resource as milk is. My hon. Friend is a Minister for fisheries as well as food and agriculture. I ask him whether what he has said means that we are having to subsidise some of the milk skim down to a level at which it can compete with fish meal which may well be taken out of the seas around our coasts, with no conservation basis. If that is so, we are subsidising the reduction of our fish stocks in a grotesque way. If it is possible we should ban the use of fish meal.
The hon. Member for Devon, West was right in his remarks about the Milk Marketing Board. It is time that the Commission dealt with this issue, not only by giving a proper hill farm subsidy or regional support for marginal milk producing areas, but by spending money on setting up the type of marketing operation which we did in the 1930s. If the new scheme works, £100 million a year will be spent. If that money is available, some of it should be spent on studying marketing operations throughout the Community.
I hope that my hon. Friend will tell the Council of Ministers of this debate. I hope that he will take copies of Hansard with him so that he can show the strength of feeling and the utter contempt which we in this House have for the way the Commission and others conduct their business in this area. At one stage our Milk Marketing Board was in danger of being dismantled. Had not some of us, and the Government, defended it, that might


have happened because there were debates during the passage of the European Communities Bill and subsequently about whether its activities were legally possible once we acceded to the EEC. We were sensible to retain the Board. We should put its ideas into operation in the rest of Europe so that we get rid of these obscene arrangements for the subsidising of pig swill.

10.47 p.m.

Mr. Nicholas Winterton: I fully endorse the views expressed by my hon. Friend the Member for Derbyshire, West (Mr. Scott-Hopkins) who made a useful contribution to the debate. Like my hon. Friend the Member for Devon, West (Mr. Mills), perhaps he did not describe the situation sufficiently harshly. It is a deplorable situation. All hon. Members representing the United Kingdom in the European Parliament should do their best to ensure that this situation does not continue and that amendments are made to the policies affecting the dairy industry to ensure that the current surplus is not repeated.

Mr. Buchan: Would the hon. Member say whether he endorses the remarks of his hon. Friend the Member for Derbyshire, West (Mr. Scott-Hopkins) about dumping in the sea, which was a true "reductio ad mare"?

Mr. Winterton: I believe my hon. Friend has perhaps been purposely misunderstood on this point. He did not say that we should dump skimmed milk powder into the sea. He said that the surplus should be disposed of in any way possible. There are those in overseas countries who are starving, who do not have an adequate diet, and who could use this powder. Although offers have been made on a world-wide scale it has not been easy to get the surplus transported to those in need.
I take up the point made by the hon. Member for Newham, South (Mr. Spearing) about "hoovering" operations in our sovereign waters around our coasts. I believe that I am right in saying that, because of the ingredients it contains, fish meal is a vital element in pig feed and cannot be replaced by skimmed milk powder.
My hon. Friend the Member for Devon, West was right to say that the

present situation is deplorable and intolerable. It is ridiculous that the marginal small dairy farmer—perhaps the man with a dozen dairy cows or even less—in France should be allowed to dominate the European situation in dairy farming and produce the present position, which has long been unacceptable. Hon. Members are right to refer to the efficiency of our own dairy industry.
What are the Government doing about selling to Europe our Milk Marketing Board? I believe that my colleagues in the European Parliament have been positively and constructively pushing the advantages of such a board and the excellent job ours does. Indeed, my hon. Friend the Member for Norfolk, South-West (Mr. Hawkins) has brought representatives of the European Parliament here to see for themselves how our board operates. While we have had useful comments from the Minister, could not he indicate what steps the Government are taking to promote to our European colleagues the advantages of the Milk Marketing Board?
We have had numerous debates, as has been said, on all aspects of the dairy industry at late hours in the House. Perhaps it is a pity that so few Members are here, because it is a useful forum for putting ideas as to how the common agricultural policy could be amended to the advantage not only of ourselves but of all the members of the Community.
A few weeks ago I visited a substantial and successful private dairy close to my constituency—Heald's Dairy of Didsbury. It has depots in my constituency. It is highly efficient. It promotes liquid milk and dairy produce sales and produces, surprisingly enough, a certain amount of dried skimmed milk powder. But I am advised that to date not a single hundredweight of that powder has been put into intervention. Why? Because there are uses to which it can be put.
As one who does not really like subsidies, believing in a market economy, I hesitate to put this forward, although perhaps it is the way we can tackle the problem, but has the Minister considered providing an incentive to the food processing industry to use more of this powder? A great deal of the powder produced in this country goes to the food and food processing industries. Could


the hon. Gentleman consider discussing the matter with his European colleagues to see whether they have investigated other outlets for this surplus, which is causing so much of a problem to the Community?
In all these considerations we must not forget the interests of our own dairy industry. I am sure that I have the support of all those hon. Members present—even though they represent perhaps only one-sixteenth of the total membership—when I say that our dairy industry is the most efficient in the Community. I hope that, in deciding how we can solve the problem of the skimmed milk surplus we do not destroy or undermine the interests of our own dairy industry.
I believe that our industry has a great deal to teach Europe. It certainly has a great deal to teach the small marginal French farmer. I hope that my own colleagues who represent this House and this country in Europe, together with the Government, will take that message to Europe.
I am delighted that the Government have accepted the amendment put down by the hon. Member for Renfrewshire, West (Mr. Buchan) because it strengthens the Government's arm. I again emphasise the point made by my hon. Friend the Member for Devon, West that we are dissatisfied with the present situation. The document we are considering not only tinkers but plays with the problem we are facing at present. More has to be done. The amendment will not solve the problem. It is yet again another interim measure.
Our Milk Marketing Board is a fine organisation. As a "market" Tory, that is perhaps a surprising thing to say, but it is. It promotes liquid milk sales. We must stand by the daily "pinta" that appears on most doorsteps up and down the country. It is one of the best and most useful ways of getting rid of so much of our milk products.
We cannot divorce the dairy industry and the beef industry. They go together. We must use beef and milk products to the best advantage.
My message is: Let the Government get off their backside and put over to our European partners that the problem we

face can be solved. But the Government must have spunk to get off their backside and say something about it soon.

10.57 p.m.

Mr. Bishop: It becomes ever more obvious that many of us are in the position of trying to defend the Common Market from those hon. Members who were the most fervent advocates of it in the early years. We certainly have to try to keep a sense of perspective in all these things. But the fact remains that skimmed milk and skimmed milk powder are products of manufactured butter.
We are glad that others are now responding to what we have already said—that those who are the most efficient producers in the Community should have the greatest encouragement to produce. But at the same time we have to keep a balance. That was the point made by the hon. Member for Devon, West (Mr. Mills).
There are one or two points that I should like to reply to. The hon. Member for Derbyshire, West (Mr. Scott-Hopkins) suggested that nothing had been done to reduce the stocks of skimmed milk powder in the EEC. Stocks are certainly high and amount to over 1 million tonnes, but this is 250,000 tonnes less than a few months ago.
The measures that we are debating tonight will help increase the use of powder and skimmed milk voluntarily. That is important as the House will recognise. The measures should help reduce not only the stockpile already built up but the surplus that may be built up in future, which could have got worse had we done nothing about it. Something is being done.
I believe that this scheme is much better than a compulsory scheme, which rightly caused so much objection in the country.
The hon. Member for Devon, West said the proposals are the wrong way to deal with the problem. I notice that the hon. Gentleman did not suggest ways of dealing with the problem, except to say that intervention prices should be reduced. I believe that the fundamental solution is to bring the EEC milk market into balance. This must mean restraint on end prices which would reduce production in the future.
There is the problem of the existing stocks. It is better to dispose of the surplus on a voluntary basis rather than on a compulsory basis, as has been done in the past.
Amongst other ways of using the surplus, the hon. Member for Macclesfield (Mr. Winterton) suggested feeding it to those countries which needed it. I remind him that this is a feature of a scheme agreed by the Community under which something like 200,000 tonnes were used in this way. Certainly this is better than the proposal of the hon. Member for Derbyshire, West that we should throw it into the sea.

Mr. Scott-Hopkins: I did not intend that remark to be taken literally. I said that this surplus mountain must be disposed of. It is no good paying the charges for storage and so on. They are mounting all the time. My basic point was that we must dispose of this mountain. I hope that this proposal will contain the existing level. But it will not dispose of it.

Mr. Bishop: I did not accept the suggestion in the sense in which it was apparently made. I was saying that we should find a use for the surpluses and that, if they could be used positively and constructively, so much the better.
The Council of Ministers agreed to increase food aid donations to 200,000 tonnes of powder. Experts consider that the total amounts now committed by developed countries are near to the maximum which can be distributed safely. There are problems in feeding it to babies and children, and this is a factor which must be taken into account.
Another factor in getting rid of some of the surpluses would be to have some regard to the price. We believe that the market price is largely decided by the intervention price which is set by the Council of Ministers. New markets for powder can be found only by a substantial price reduction which, we believe, is what this proposal will allow.
I pay tribute to the way in which my hon. Friend the Member for Renfrew-shire, West (Mr. Buchan) moved the amendment, which has the support of the House. The House has shown, not only tonight but on many occasions, how anxious we all are that the surpluses

should be dealt with in a positive way, which is at source by preventing them from arising.
I come, then, to the Government's general policy in relation to surpluses, because this is at the root of the whole problem. We have had a number of opportunities in recent months to debate this matter, and the Government's views are well known to the House. But they will bear repetition.
My right hon. Friend has made it clear that the problems of surpluses in the dairy sector must be tackled firmly. The hon. Member for Macclesfield wondered what the Government intended to do about them and urged Ministers to stiffen their resolve. This has been a feature of the present Government's policy in the last few years. We believe that the fundamental reason for those surpluses is that, for a number of years now, prices have been set too high. These have led to production far in excess of what consumers are prepared to buy, and at a cost which reduces demand. The only long-term solution, as the hon. Member for Devon, West said, is to restrain end prices. We shall be approaching successive price-fixing exercises with that aim in mind.

Mr. Peter Mills: Again, I do not think that the Minister has entirely understood what I said. I did not say that the end prices should be reduced. Obviously, if costs rise in milk production, the price of the milk to the farmer must be increased. What is wrong is the intervention level on skimmed milk powder. That is entirely different from the end price for liquid milk.

Mr. Bishop: I need no clarification of this factor, because the incentive to produce milk or any other commodity must be related to the reward in relation to the costs of production. If the reward is not high enough, costs of production may be a mitigating factor in production itself. We have to get the balance right. The more efficient producers should be encouraged and the less efficient should be discouraged. We have to get the right balance in the end price and also in the intervention price.
The hon. Member for Macclesfield asked about where the Government stood with the Milk Marketing Board. We


have had many debates on the boards which are a feature in the production of various commodities in this country. We have said time and time again that we want to make sure that the essential features of production are maintained.
We all recognise the value of the Milk Marketing Board over the last 43 years or so in stabilising production and marketing milk in this country. We have made our attitude on the future of the Board very clear to our colleagues in Europe.

Mr. Nicholas Winterton: Will the Minister go back to the point raised by my hon. Friend the Member for Devon, West (Mr. Mills) about the end price of milk? Is he aware that his remark this evening that the only way to resolve the situation is by restraining the end price which the consumer pays for his pint will be received with dismay by the dairy farmers? At the moment they are in grave difficulties, and I have had a lot of representations about the problems they face as a result of inflation. The point my hon. Friend was making was about restraining the intervention price.

Mr. Bishop: I take note of the hon. Gentleman's remarks. I am talking about encouragement for production of any commodity. At the end of the day, prices must be related to the need for the commodity, and the cost of production. Those countries which can produce commodities more efficiently should be encouraged, and others restrained. Otherwise the whole thing will get out of balance and we will wind up with surpluses like those we are dealing with tonight.
The House has already debated the EEC action programme proposals, and the Government's views on this are on record. The action programme is still before the Council, but the Commission's proposals for prices in the new marketing year will become available early next month. For our part, we shall seek to achieve the maximum degree of restraint on prices of commodities which are in surplus, such as those in the dairy sector, subject to the points I have just made.
I believe that the points raised by my hon. Friend the Member for Renfrew-shire, West are relevant—there is a need to take account of the contribution of the United Kingdom to the Community

budget as a whole. We contribute 19·2 per cent. of that budget. Between 70 per cent. and 75 per cent. of the budget relates to the common agricultural policy. This is the extent of our contribution to the Community, and when people talk about the green pound, and this country receiving charity from the EEC, they should recognise the significant contribution that we make to the overall budget, and to the CAP.
This has been a useful debate, and the Government will take note of what has been said.

Mr. Michael Jopling: I am very disappointed that the Minister has not referred to the crucial matter of liquid skim milk which was raised by my hon. Friend the Member for Derbyshire West (Mr. Scott-Hopkins). He mentioned the difficulty of getting a contract. If the Minister knows anything at all about the pig industry he will know that the producers moan constantly that they enter into contracts to get liquid skimmed milk, and before long they find that the dairy is unable to supply it.

Mr. Bishop: I apologise for having overlooked that point. The need for a scheme to subsidise liquid skim for farmers was raised by the hon. Member for Derbyshire, West. The scheme is intended to make skimmed milk in liquid form competitive with other protein feeds, and in this way it should be more attractive to pig farmers than it is at present.
The details of the arrangements will have to be worked out, but it is necessary to ensure that if liquid skim is to be made usable by pig producers there must be an assurance of continuity of supply.
That is the basis of the need for the contract. Farmers may thus be prepared to enter into contract arrangements with the supplier. The proposals are aimed at securing these contract arrangements, but the details have yet to be agreed. The need for an assurance about continuity of supply makes that necessary.

Amendment agreed to.

Main Question, as amended, put and agreed to.

Resolved,
That this House takes note of Commission Document No. R/70/77 on Skimmed Milk and Skimmed Milk Products, but regrets


that such disposal arrangements are necessary; recognises the need to secure adjustments to the price support arrangements in order to achieve a better balance of the market in the milk sector; and urges the need to take further steps to avoid the creation of structural surpluses.

Orders of the Day — EUROPEAN COMMUNITY (CHILLED POULTRY)

11.11 p.m.

The Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food (Mr. Gavin Strang): I beg to move,
That this House take note of Commission Documents Nos. R/1929/76 and R/89/77, welcomes the progress that has been made towards arrangements for the continued use of the immersion method of chilling poultry, and supports the Government's intention to secure detailed amendements to meet the needs of the UK industry while retaining adequate health safeguards for the consumer.
I welcome the opportunity to debate the Commission's proposals on immersion chilling of slaughtered poultry. Let me first briefly trace the history leading to the proposals contained in document R/1929/76.
Before our entry into the Community the Six had legislated to ban the spinchiller process. This was a process for chilling poultry carcases by common immersion in a tank of cooled water. It is perhaps unfortunate that the name "spinchiller" has become loosely attached to all subsequently developed commercial immersion chilling processes because the original spinchiller was demonstrated by experiments carried out in Germany in the early 1960s to be unhygienic. It was on the basis of those experiments that the spinchilling process was originally banned in EEC Directive 71/118, which deals with health problems of trade in fresh poultry meat.
More recently, developed immersion chilling equipment has become widely used in the main areas of poultrymeat production in the United Kingdom, and the ban would have imposed a heavy economic, and in our view unnecessary, burden on our industry. The ban was due to have effect from 1st January 1977, at the latest, but in the negotiations for the amendment of the poultrymeat directive we were instrumental in getting the date deferred to 1st January 1978. At the same time we pressed for an

examination of poultry chilling processes. We were not alone in this. For example, Denmark and Holland were also anxious to establish that controlled methods of immersion chilling could be effective and satisfactory in hygiene terms. The outcome was that the deferment of the ban would give time for the Commission to submit a report and recommendations on those processes which should be unaffected by the ban.
With the full co-operation of the trade and using the expertise of the Food Research Institute at Norwich, the United Kingdom co-operated as did some other member states, with the Commission in the practical experiments that preceded the preparation of the Commission's report and proposals now before us.
The report and proposals are welcome, in that they firmly recognise that properly conducted immersion chilling processes are hygienically acceptable.
On the other hand, there are matters of detail on which we feel that adjustment is needed. The report of the Select Committee on whose recommendation we are debating the subject tonight said—
The Committee received written evidence about this instrument from the British Poultry Federation, the National Farmers' Union and the EEC Consumers Co-ordinating Group. This evidence welcomed the report's findings that immersion chilling can be hygienically satistactory because that process is of vital interest to the British poultry industry.
The Committee's report then went on to refer to specific points of detail, and I now propose to do likewise.
The Commission proposed that all immersion chilling equipment should be of stainless steel. This would have involved replacement of equipment at considerable cost, which, in our view, would be unjustified on grounds of hygiene. Happily, the European Parliament shared this view which it voiced when giving its opinion on the proposal to the Council. In document R/89/77 the Commission has formally amended its original proposal to substitute "non-corrodible material" for "stainless steel". This is an encouraging development and I hope that it will eventually be endorsed by the Council.
There are a number of other areas that we shall pursue in the detailed Council discussions on the Commission's proposals.
The proposal for a Council directive states positively in Article 4(a) that:
A system whereby the carcases are pushed along by mechanical means through a counter flow of water is acceptable.
In the United Kingdom there are many immersion chillers that operate with the birds moving in the same direction as the flow of water. We believe that such processes can be demonstrated to be acceptable from a hygiene point of view and we will be using every effort to secure the positive recognition of such processes.
Another point of importance is that the proposals are framed to apply to all species of poultry that are subject to the basic directive. The scientific work on which the report and proposals were based was confined to chickens. A number of different factors need to be taken into account in legislating for other species, especially turkeys and ducks.
We also believe that there is room for greater flexibility over the specifications of water and carcases temperatures and the volume of water to be used, especially in relation to the spray washing of carcases before they enter the immersion chiller.
I can assure the House that in the negotiations on the Commission's proposals the Government will take account of all these matters and we shall continue to consult with the industry and to draw fully on the expertise of the scientists at the Food Research Institute as the discussions proceed.

11.17 p.m.

Mr. James Scott-Hopkins: This is a more satisfactory situation than the one that we have just debated. I was glad to hear of the Government's total commitment to the principle of immersion spinchilling. That will be welcomed by the poultry industry. The European Parliament, the European Commission and the Commission concerned have also unequivocally accepted that the new and modern techniques may be used throughout the Community.
The Minister went quickly over the various points that have caused anxiety, but perhaps he has ungenerous on one point. There was great anxiety in the industry that stainless steel would have to be used in the spinchilling process. My hon. Friends in the Conservative Group

in the European Parliament moved the amendment on this and it was accepted. I am glad that it was also accepted by the Commission. It will make things much easier because it would make things excessively costly and difficult to try to introduce the proposals originally made by the Commission.
I was a little unclear about the position concerning ducks and turkeys, and I am sure that the industry will also be unclear about it. The Minister rightly said that these proposals were meant to concern all poultry, but in fact they refer only to chickens. Larger birds will obviously have to have different temperatures and times for immersion. The proposals are therefore incomplete. I find that strange because the Commission do not normally put forward incomplete proposals, particularly on subjects as sensitive as this one. Can the Minister tell us what timetable there will be for the proposals to deal with ducks and turkeys?
I was glad that the Minister referred to the problems about temperature. There are certain anomalies, and I hope that they will be dealth with. Will there be an opportunity for debating that point here or in the European Parliament?
The same consideration applies to the regulations on water content. I doubt that there will be much difficulty about this, because the Commission is seized of the problems and is prepared to deal with them sensitively. But we have only between now and January 1978 and, judging by the speed with which the Government deals with such matters, one must doubt whether it can be done in that time.
If the Minister wishes to seek concessions from the Commission he must remember that the Government have just about used up all their credit on concessions. He must work in the context of what went on and the way that Ministers behaved before we took over the chairmanship of the Council of Ministers. We have just about bankrupted the tolerance of our fellow members. Ministers may not get the full brunt of this feeling, but my right hon. and hon. Friends and I in the European Parliament know that there has been a marked decline in the acceptability of the British point of view because of the way the Government have behaved. I only hope that the Minister will be able to work in agreement with


other Ministers in dealing with such matters as water, temperature and immersion times for ducks and turkeys.
On the whole, I welcome what is proposed and I hope that it will be accepted by the House.

11.21 p.m.

Mr. Peter Mills: I also welcome the proposals, which are a different story from the last regulations that we were discussing. The British Poultry Federation tells me that this matter is of vital interest to the poultry-meat processing industry in the United Kingdom because it would have been put in a very serious position unless something had been done.
We are sometimes critical in this House, and it is important that we should pay tribute to the industry for the efficient way in which it produces birds and for the way in which the birds are sold to the consumer, who get a good deal from the poultry industry. We also often criticise the Government and other bodies, and it is right to pay tribute now to the Government and all concerned for bringing about this change within the Community. So much was at stake.
It has been a good exercise; a united front was shown and the Community has seen the wisdom of the arguments presented by the trade, the Ministry and others. We welcome the proposals and congratulate all those involved in their formulation.
However, the federation brief expresses concern that unless everything is signed, sealed and delivered, our export trade could be adversely affected. If the immersion chiller is banned or substantially altered, it could be difficult for our exporters. I hope that the Minister will give us some reassurance on that point. We do not want our export trade to suffer.
I know that the Commission has power to regulate and control the water content in fowl carcases, but this needs to be watched carefully. I welcome the reduction in the permitted allowance of water in such carcases. That is a useful step.
The Commission has not been forthcoming on its research; this should be published. Will the Minister assure us that he will arrange for the trade to be notified of what has gone on and for

the research to be published so that it is open to all?
I am sure that the Minister can reassure the industry on these three points—exports, the water content regulations and research—and that the House will speedily approve the motion.

11.25 p.m.

Mr. Strang: We have had a fairly useful debate. By and large, it has confirmed that the objectives that the Government are setting for themselves regarding this directive are shared by hon Members on both sides of the House.
I think that I should go over some of the points which have been made. The Government recognise that there will have to be adjustments in the temperatures prescribed. Our view, which is shared by hon. Members, is that additional research work is required for species other than chickens—for example, turkeys and ducks—and that it would be wrong to apply the same criteria to them.
The hon. Member for Devon, West (Mr. Mills) referred to the water content. I endorse what he said on that matter.
The publishing of research is a matter for the Commission. The Government are urging the Commission to publish the results of the research which has been carried out. However, the hon. Gentleman will recognise that is for the Commission to decide. I am sure that the hon. Member for Derbyshire, West (Mr. Scott-Hopkins) will agree that that matter could be pursued to greater effect at the European Parliament.
The hon. Member for Derbyshire, West was a little ungenerous to the Government in his sweeping reference to our position in the Community. I found relations in recent negotiations in which I have been involved at the Council regarding derogations in relation to animal health quite satisfactory. We got a first-class result in that respect. We also got a first-class deal from the beef regime, which commences in April. I think that that we have some vital interests to defend. One which comes readily to mind is fishing. Our interest there is very different from that of other member States. If the price of securing our interest is a bit of dissension in the short term, it is unavoidable.
I assure the hon. Gentleman that there is no question of the Government's not


being fully committed to the basic aims and objectives of the Community. I hope that the House will be happy to endorse the objectives which the Government are setting themselves in relation to these matters. I am sure that they will meet the legislative needs of our industry.

Question put and agreed to.

Resolved,
That this House takes note of Commission Documents Nos. R/1929/76 and R/89/77, welcomes the progress that has been made towards arrangements for the continued use of the immersion method of chilling poultry, and supports the Government's intention to secure detailed amendments to meet the needs of the UK industry while retaining adequate health safeguards for the consumer.

Orders of the Day — TOWN AND COUNTRY PLANNING (SCOTLAND) BILL [LORDS]

Order for Second Reading read.

Ordered,
That the Bill be referred to the Scottish Grand Committee.—[Mr. Stoddart.]

Orders of the Day — EUROPEAN LEGISLATION, &c.

Ordered,
That the Standing Order of 18th November 1974 relating to the nomination of the Select Committee on European Legislation, &amp;c. be amended, by leaving out Mr. James Craigen and inserting Mr. John Cartwright.—[Mr. Stoddart.]

Orders of the Day — DARTMOOR (ANCIENT MONUMENTS)

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Stoddart.]

11.28 p.m.

Miss Janet Fookes: Writing about Dartmoor, Mr. James Mildren, the environment correspondent of the Western Morning News, which circulates widely in the West Country, said:
Oh Dartmoor, Thy Name is Controversy.
Rarely has a journalist spoken a truer word.
There are competing, not to say conflicting, interests of all kinds. For example,

there are the farmers who live by the soil of Dartmoor. There is the Army, which depends to a great extent on the use of Dartmoor for exercises since it is a remote area. There are china clay companies, which produce china clay which is of great importance to exports and to those employed in the industry. There are the ramblers and the nature lovers, who see Dartmoor as a marvellous place to get away from the madding crowd. There are the conservationists generally, who want to see that it is preserved from harm. There are the archaeologists, with their specialised interests. All those visitors now come flocking to the moor by car.
Dartmoor is largely a national park. That imposes heavy obligations on the committee of the county council that is charged with looking after those interests. It has to bear in mind national considerations when dealing with all these matters. It finds it ironical that the very popularity of Dartmoor is causing problems in itself. It is estimated, for example, that about 9,000 people will swarm out from Plymouth on a fine Sunday afternoon in the summer and that perhaps 7,000 more will come from the Torbay area. With the completion of the M5, the Dartmoor National Park is now within three and a half hours' driving for 18 million people. It is fervently to be hoped that they do not all come at once. Nevertheless, that is an indication of the importance of this exceedingly lovely wild stretch of countryside that I have come to love very much during my time as a Member for one of the Plymouth seats.
Dartmoor is also remarkable for the number of its ancient monuments, which are the subject of the debate. The National Park Committee might be forgiven if its preoccupation with other aspects of the moor led it to neglect this aspect. Happily, the National Park Plan, which is still in draft, although there is a statutory requirement to place it before the Minister in due course, gives ancient monuments a high priority. Indeed, it describes their conservation as a prime objective, stating that they should be preserved by all possible means.
There are so many ancient monuments on Dartmoor that it has been described in the past as an inexhaustible treasure house of Bronze Age relics, but I think we have learned in this modern age,


when things can be swept away so fast by the pace of change, to distrust anything that is described as inexhaustible. It is only too easy to exhaust our heritage.
It means, in simple terms, that our remote forebears living about 2,000 years before the birth of Christ formed settlements on Dartmoor. They farmed, enjoyed some simple amusements and, like all of us now, were subject to death. All these aspects of life and death are reflected in the stones that they left behind. We can trace them by looking at the circular stone foundations of their huts, their enclosures, their burial cairns and their field systems generally.
There are even strange circles whose meaning is not fully known but which may well have been used for astronomical observations. Hundreds of years later, in medieval times, crosses were set up to help guide travellers across Dartmoor and to act as little centres of devotion. These, too, are now part of our heritage.
One of the finest groups of Dartmoor monuments, ironically enough, lies just outside the national park boundaries. They have been under threat of destruction since planning permission was granted in 1951 for tipping china clay waste. It is doubtful now that planning permission would ever be granted if it were sought. Nevertheless, it is in that sense a fait accompli. It has been a burning issue locally, and continues to be, and has, moreover, aroused national concern.
I quote two distinguished archaeologists, the late Sir Mortimer Wheeler and Jacquetta Hawkes, who wrote to The Times in November 1975 as follows:
We are of the united opinion that the loss of these antiquities would constitute little less than a national disaster.
I echo that, and would add that not only are these monuments most precious, but they are in a very lovely setting, in an area, to use the jargon of landscaping, of outstanding natural beauty. Furthermore, they are fairly accessible from the main centre of population, Plymouth, which is itself the regional centre, so it is very easy for visitors, school parties and the like to visit this particular spot. It is known as Shaugh Moor, and the

actual area under threat of destruction is known on the maps as Area Y.
In the longer term there is a strong case for altering the boundaries of the national park to include this area. Indeed, this was envisaged in the Sandford Report, which reviewed national park policy and reported in 1974. It suggested that the existing boundaries should not be sacrosanct. It was of course referring to all national parks, but I think that that was particularly relevant to this area.
In the more immediate problem there is one encouraging sign. The two china clay companies operating in the area, Watts, Blake and Bearne, and English China Clays, are now in negotiation to see whether Area Y can be saved from tipping either by sharing tipping facilities or by exchanging land. I can provide the Minister with a map showing this more clearly if he wishes. I warmly commend the two companies for taking this very enlightened view, and I wish them well in these negotiations.
Why, then, the concern that leads me to ask for this Adjournment debate tonight? Ironically enough, on this occasion it is not the china clay companies but the Department of the Environment itself that is causing me acute concern. I have been reliably informed that the Department is organising a so-called rescue dig, beginning at Easter and continuing until August 1977. Presumably, it is intended to make a record of what is there before the area is obliterated for ever under mountains of china clay waste. However, I gather that this would involve stripping off the turf and removing and not replacing the stones, and that would be what one might term excavating to the death.
I hope that tonight the Minister will be able to reassure me, but if it is the intention of the Department to go ahead on the lines I believe to be intended, I can only beg the Minister, with all the force at my command, in no circumstances to allow the excavations to go ahead, at least before the china clay companies have been given a full opportunity to make some arrangement that would enable tipping to take place other than in Area Y. If he is to take any action, surely he should use his good offices to forward these negotiations.
We look to the Department to act as the guardians of this precious heritage of ours. I remind the Minister of the old adage—noblesse oblige. The Department is of high rank, and it carries an obligation to do all in its power to save these monuments on Dartmoor. I hope that we shall not be disappointed by what the Minister has to tell us tonight.

11.40 p.m.

Mr. Anthony Steen: My hon. Friend the Member for Plymouth, Drake (Miss Fookes) has performed a service to the nation by raising tonight a question of exceptional public importance and of deep national significance which goes beyond constituency boundaries and strikes at the root of our national heritage—the preservation of ancient monuments on Dartmoor.
We who represent cities such as Liverpool have seen the ravages of urban decay and the wholesale destruction of our fine buildings. We are therefore the first to appreciate the importance of preserving the great monuments and buildings of the past. The monuments on Dartmoor tell our island story of life lived thousands of years ago by our ancestors. I take it that the Minister will agree that each of these monuments must be preserved. If that is so, I must tell him that his Department seems hell-bent on destroying a unique complex of ancient monuments which have international acclaim. These consist of a dozen hut circles enclosing pounds, a cairn circle, a number of tumuli, a stone row and a number of important reeves. Those are on Shaugh Moor.
Although the area of these historic remains is of high landscape value, the real significance is the unique combination of two different cultures on one site—the early Bronze Age and the later rectangular field system. Not surprisingly, in 1971 the Department listed this network as an ancient monument. Yet the paradox is that the Department is to start an excavation to destruction here at Easter. The Minister will be horrified to learn that the operation involves deep digging and turf stripping. The stones of the monuments will be moved and the area laid waste.
Furthermore, the Minister will probably need to divert the public footpath, Shaugh Prior 55, which runs right through

these ancient monuments. How is he to do that?
Will the Minister tell the House what regard he has taken of public interest? On whose authority has he authorised obliteration of these wonderful monuments? The public will benefit nothing from the archives resulting from the dig, but people do care for freedom of access to Shaugh Moor, the incredible views from there, and the interest and fun of discovering monuments on the ground at the very spot where their predecessors built them.
Will the Minister tell the House tonight that he will stop the dig going ahead until an inquiry has been held, and that he will not agree to be a party to an environmental crime—an act of vandalism—of such magnitude?
I cannot believe that the Minister, having heard these pleas, will be oblivious to what is happening—or has the turf been pulled over his eyes? He must be aware that by savaging relics of the past he will have a lot to answer for, both in the House and elsewhere. Will he therefore tell the House tonight that he will not willingly be a party to an environmental crime of such magnitude?

11.43 p.m.

The Under-Secretary of State for the Environment (Mr. Kenneth Marks): I am grateful to the hon. Member for Plymouth, Drake (Miss Fookes) for the way in which she has reminded us of the broader aspects of the importance of Dartmoor as well as that of the ancient monuments on the moor and in the surrounding countryside. The hon. Member for Liverpool, Wavertree (Mr. Steen) pointed out—I am sure that those present in the House will agree with him—the importance of places such as Dartmoor to those of us who live in and represent the great cities.
I appreciate what hon. Members have said about the importance of the ancient monuments of Dartmoor. It is of paramount importance in British archeology. As the hon. Lady said, 4,000 years ago, when the climate was markedly milder than it is now, the moor was occupied by successive populations of hunters and farmers. In many areas physical remains of the period are plentiful. These take the form of the stone walls of circular huts, which occur either singly or in both


enclosed and unenclosed village groups. Associated with them are extensive and superimposed systems of boundary walls dividing the moorland up into large "estates" as well as into individual farmsteads and fields.
Also to be found are stone rows and circles, the ritual monuments that, together with the numerous burial cairns and mounds, indicate something of the less material side of life then, and of the ways in which the people disposed of their dead.
However, over-exploitation of the land—it is interesting that that should have happened 3,000 years ago, as well—together with rapidly worsening climate, led to the deposition of a layer of blanket-bog over most of the area between the years 1200 and 800 BC. Densest on the higher and more level ground, this peat rendered the ground of little use agriculturally, while sealing beneath it the prehistoric land surface and in places the sites and monuments themselves.
Occupation of the moor continued, with much sparser populations. Thus, there survive many other hut circles, which can date from as late as the Roman period, as well as deserted medieval sites.
The Department has endeavoured to discharge its responsibilities under the Ancient Monuments Acts by scheduling, that is, giving a status and legal protection to, over 400 monuments. We already have under our direct care a large area at Merrivale, where there is a concentration of stone rows, cairns and settlements, and the deserted medieval village at Hound Tor. We are hoping to add the enclosed settlement at Grimspound, and a very extensive area of archaeological lansdcape in the upper Plym Valley, which contains monuments of many types and dates. The Plym Valley scheme has a special purpose—to preserve not only the monuments themselves but also their natural setting.
In the past, there has been concern about damage from the use of Dartmoor by the Services. More years ago than I care to remember, I was one of those who dug on that site, but not for archaeological purposes. There has also been concern about damage from afforestation. I am glad to say that the situation has greatly improved, thanks to improved liaison arrangements with

the Ministry of Defence. We are not complacent about this, and are keeping the position under continuous review. As for forestry operations, I pay tribute to the Working Party on the Conservation of Ancient Monuments on Forestry Commission land, which was set up in 1975 by the Devon County Council and in which the Dartmoor Preservation Association plays an important part.
Both hon. Members have expressed concern over the future of Area Y, on Shaugh Moor, which is part of the area for which permission to work china clay has been held by Messrs. Watts, Blake and Bearne since 1951. This area contains several monuments and field systems, the loss of which would be a matter for regret. The Ancient Monuments Board for England at one stage advised that the whole complex of monuments in this area should be preserved. Its advice was conveyed to the Devon County Council. The Council took full account of it in its review of all aspects of the problem published in 1975, including possible alternative sites. When the report of that review was available to them the Ancient Monuments Board accepted that, if it was not possible to preserve the inviolability of the whole of Area Y, the county council's proposal for a North Saddleborough Tip was the solution least harmful to the general environment, including the monuments.
The county council decided not to revoke the 1951 permission. The Secretary of State decided not to intervene. This is not the occasion for a debate on that decision since it involves many considerations besides ancient monuments. It is fair to say that the monuments in Area Y are neither unique nor so extremely important that their preservation on the site must outweigh all other considerations.
In 1976 the Department carried out an archaeological survey of the monuments in Area Y in order to obtain information necessary to plan a programme of further investigation, including excavation, which will be essential before the monuments are affected by china clay working. We regard such investigations to obtain knowledge from the sites while they are still accessible as a matter of plain duty. The programme of investigation will extend over several years. The first stage will be begun, with the consent


of the owners of the land and the mineral rights, in April 1977.
In view of what the hon. Lady has said about negotiations between the companies involved I shall willingly postpone the proposed excavations in Area Y if the tipping programme is halted. We have no information to suggest that this is to be expected. In those circumstances, we must continue with our preparation for a carefully-phased programme, unless and until conclusive evidence that they are unnecessary is forthcoming from the firms involved or the county council. We do not have such evidence at present. There is only just enough time to carry out the programme to a standard that is compatible with the significance of the monuments and we cannot put the programme at risk on unsubstantiated evidence. If the firms involved are considering this, I hope that they will let us know. I shall do all in my power to encourage such discussions and to encourage the postponement, and if possible the decision not to dig on the site.
While regretting the expected loss of these monuments, I must point out that there is a positive side, in that the knowledge that we expect to obtain from them will enlarge understanding of the archaeology of Dartmoor.
I should like to refer also to the monument No. 872. There has been an allegation that a channel has been recently dug through a prehistoric pound or encloure on Shaugh Moor in contravention of the Ancient Monuments Acts. The Department has examined the site recently in response to letters and the publication of the allegation in the Press.
The monument is not scheduled. It was considered by an inspector of ancient monuments several years ago—that is how it got a number—but the proposal was never put forward by the Inspectorate to the administrative division which gives notice of proposed scheduling and completes the formal procedures. The surviving departmental records do not reveal why the Inspectorate did not propose scheduling. The owner and occupier of the land were never notified that scheduling was contemplated, and there is no entry in respect of the monument in the register of local land charges as there would be if it were scheduled.
Misunderstanding may have arisen because an inspector of ancient monuments, in giving evidence at a public inquiry in 1971 into an application to work china clay on Lee Moor, submitted a list of monuments showing some as scheduled and others as proposed for scheduling. No. 872 was wrongly included in the scheduled category. This error has only just been found by the Department, while investigating the present complaint. It was of no consequence at the 1971 inquiry.
I am informed that the monument itself is virtually a wreck. It is flooded, and encroached upon by tipping. My advisers cannot say for certain whether the channel was recently dug or made some years ago, as, I understand, the firm believes. It has rushes growing in it, a fact which suggests that it cannot be very recent. The Department believes that the monument in its present state is not worthy of scheduling, but we shall consider whether to arrange an excavation of what survives.
I shall not leave this unfortunate incident—there has been a lack of information and communication—without making it clear that the Department is grateful to hon. Members and other people who draw our attention to damage or threats to monuments, whether scheduled or not, since we have not the staff to inspect them regularly. We follow up such information and make inspections where that seems desirable. We cannot always do that as quickly as we would like because our inspectors have a very full work load and their time is often committed for many days ahead. Accordingly, we would ask to be given a reasonable chance to look into complaints before accusations are made. We can often do a lot to safeguard monuments by advice and persuasion.
I regret any embarrassment that the 1971 error may cause to those who have been misled by it. It is fair to add that the Department was not given much time to look into the matter before the accusation was published. The first letter of complaint to us was dated 3rd January and the accusation appeared in the Press on 11th January.
Apologies are due to Messrs. Watts, Blake and Bearne, which has been wrongly accused of "wanton and unlawful behaviour". I should like to add that


the Department has for many years found the firm most co-operative in voluntary negotiations to minimise damage to monuments, so far as its operational requirements permit, and in giving access to its land for the purpose of archaeological investigation.
I assure hon. Members that I shall keep the whole question under review, particularly in view of what the hon. Lady said

about negotiations taking place between the companies. I shall do what I can. I shall discuss the matter with my noble Friend Lady Birk, who is responsible in the Department, and see what we can do in what has become an unfortunate circumstance.

Question put and agreed to.

Adjourned accordingly at five minutes to Twelve o'clock.